Correlation Between Chevron Corp and American Airlines
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and American Airlines 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 American Airlines into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and American Airlines Group, you can compare the effects of market volatilities on Chevron Corp and American Airlines 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 American Airlines. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and American Airlines.
Diversification Opportunities for Chevron Corp and American Airlines
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Chevron and American is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and American Airlines Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Airlines 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 American Airlines. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Airlines has no effect on the direction of Chevron Corp i.e., Chevron Corp and American Airlines go up and down completely randomly.
Pair Corralation between Chevron Corp and American Airlines
Considering the 90-day investment horizon Chevron Corp is expected to generate 0.6 times more return on investment than American Airlines. However, Chevron Corp is 1.66 times less risky than American Airlines. It trades about 0.01 of its potential returns per unit of risk. American Airlines Group is currently generating about 0.0 per unit of risk. If you would invest 15,846 in Chevron Corp on January 26, 2024 and sell it today you would earn a total of 511.00 from holding Chevron Corp or generate 3.22% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Chevron Corp vs. American Airlines Group
Performance |
Timeline |
Chevron Corp |
American Airlines |
Chevron Corp and American Airlines Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Chevron Corp and American Airlines
The main advantage of trading using opposite Chevron Corp and American Airlines positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, American Airlines 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 American Airlines will offset losses from the drop in American Airlines' long position.Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Suncor Energy | Chevron Corp vs. TotalEnergies SE ADR | Chevron Corp vs. Petrleo Brasileiro SA |
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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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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