Correlation Between Chevron Corp and Walmart
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Walmart at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Chevron Corp and Walmart into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Walmart, you can compare the effects of market volatilities on Chevron Corp and Walmart and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Chevron Corp with a short position of Walmart. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Walmart.
Diversification Opportunities for Chevron Corp and Walmart
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Walmart is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart and Chevron Corp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Chevron Corp are associated (or correlated) with Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Chevron Corp i.e., Chevron Corp and Walmart go up and down completely randomly.
Pair Corralation between Chevron Corp and Walmart
Considering the 90-day investment horizon Chevron Corp is expected to generate 1.84 times less return on investment than Walmart. In addition to that, Chevron Corp is 1.25 times more volatile than Walmart. It trades about 0.02 of its total potential returns per unit of risk. Walmart is currently generating about 0.04 per unit of volatility. If you would invest 4,957 in Walmart on January 25, 2024 and sell it today you would earn a total of 1,023 from holding Walmart or generate 20.64% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Chevron Corp vs. Walmart
Performance |
Timeline |
Chevron Corp |
Walmart |
Chevron Corp and Walmart Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chevron Corp and Walmart
The main advantage of trading using opposite Chevron Corp and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Walmart can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Walmart will offset losses from the drop in Walmart's long position.Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
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Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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