Correlation Between Suncor Energy and Chevron Corp

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Can any of the company-specific risk be diversified away by investing in both Suncor Energy and Chevron Corp 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 Suncor Energy and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncor Energy and Chevron Corp, you can compare the effects of market volatilities on Suncor Energy and Chevron Corp 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 Suncor Energy with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncor Energy and Chevron Corp.

Diversification Opportunities for Suncor Energy and Chevron Corp

0.66
  Correlation Coefficient

Poor diversification

The 3 months correlation between Suncor and Chevron is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Suncor Energy 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 Suncor Energy are associated (or correlated) with Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Suncor Energy i.e., Suncor Energy and Chevron Corp go up and down completely randomly.

Pair Corralation between Suncor Energy and Chevron Corp

Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 1.35 times more return on investment than Chevron Corp. However, Suncor Energy is 1.35 times more volatile than Chevron Corp. It trades about 0.01 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.04 per unit of risk. If you would invest  3,887  in Suncor Energy on April 24, 2024 and sell it today you would lose (9.00) from holding Suncor Energy or give up 0.23% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Suncor Energy  vs.  Chevron Corp

 Performance 
       Timeline  
Suncor Energy 

Risk-Adjusted Performance

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Very Weak
Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Suncor Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.
Chevron Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Suncor Energy and Chevron Corp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Suncor Energy and Chevron Corp

The main advantage of trading using opposite Suncor Energy and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor Energy position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.
The idea behind Suncor Energy and Chevron Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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