Correlation Between Alandsbanken Abp and Chevron Corp

Can any of the company-specific risk be diversified away by investing in both Alandsbanken Abp 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 Alandsbanken Abp and Chevron Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Alandsbanken Abp B and Chevron Corp, you can compare the effects of market volatilities on Alandsbanken Abp 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 Alandsbanken Abp with a short position of Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alandsbanken Abp and Chevron Corp.

Diversification Opportunities for Alandsbanken Abp and Chevron Corp

0.33

Correlation Coefficient

Alandsbanken Abp  Chevron Corp

Weak diversification

The 3 months correlation between Alandsbanken and Chevron is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Alandsbanken Abp B and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and Alandsbanken Abp 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 Alandsbanken Abp B 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 Alandsbanken Abp i.e., Alandsbanken Abp and Chevron Corp go up and down completely randomly.

Pair Corralation between Alandsbanken Abp and Chevron Corp

Assuming the 90 days trading horizon Alandsbanken Abp B is expected to under-perform the Chevron Corp. In addition to that, Alandsbanken Abp is 1.3 times more volatile than Chevron Corp. It trades about -0.1 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.01 per unit of volatility. If you would invest  16,044  in Chevron Corp on February 3, 2024 and sell it today you would earn a total of  29.00  from holding Chevron Corp or generate 0.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Alandsbanken Abp B  vs.  Chevron Corp

Alandsbanken Abp B

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alandsbanken Abp B has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Alandsbanken Abp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Chevron Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Alandsbanken Abp and Chevron Corp

The main advantage of trading using opposite Alandsbanken Abp and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Alandsbanken Abp 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 Alandsbanken Abp B 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.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.