Correlation Between Repsol SA and Chevron Corp

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

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

Diversification Opportunities for Repsol SA and Chevron Corp

-0.32

Correlation Coefficient

Repsol SA  Chevron Corp

Very good diversification

The 3 months correlation between Repsol and Chevron is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Chevron Corp CEDEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp CEDEAR and Repsol SA 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 Repsol SA 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 CEDEAR has no effect on the direction of Repsol SA i.e., Repsol SA and Chevron Corp go up and down completely randomly.

Pair Corralation between Repsol SA and Chevron Corp

Assuming the 90 days trading horizon Repsol SA is not expected to generate positive returns. However, Repsol SA is 101.93 times less risky than Chevron Corp. It waists most of its returns potential to compensate for thr risk taken. Chevron Corp is generating about 0.21 per unit of risk. If you would invest  1,005,000  in Chevron Corp CEDEAR on April 23, 2025 and sell it today you would earn a total of  200,000  from holding Chevron Corp CEDEAR or generate 19.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Repsol SA  vs.  Chevron Corp CEDEAR

Repsol SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Corp CEDEAR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp CEDEAR are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Chevron Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol SA and Chevron Corp

The main advantage of trading using opposite Repsol SA and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA and Chevron Corp CEDEAR 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.