Correlation Between IShares Semiconductor and Chevron Corp

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

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

Diversification Opportunities for IShares Semiconductor and Chevron Corp

0.28

Correlation Coefficient

IShares Semiconductor  Chevron Corp

Modest diversification

The 3 months correlation between IShares and Chevron is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding iShares Semiconductor ETF and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and IShares Semiconductor 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 iShares Semiconductor ETF 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 IShares Semiconductor i.e., IShares Semiconductor and Chevron Corp go up and down completely randomly.

Pair Corralation between IShares Semiconductor and Chevron Corp

Given the investment horizon of 90 days iShares Semiconductor ETF is expected to under-perform the Chevron Corp. In addition to that, IShares Semiconductor is 2.63 times more volatile than Chevron Corp. It trades about -0.11 of its total potential returns per unit of risk. Chevron Corp is currently generating about 0.27 per unit of volatility. If you would invest  15,908  in Chevron Corp on January 30, 2024 and sell it today you would earn a total of  681.00  from holding Chevron Corp or generate 4.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

iShares Semiconductor ETF  vs.  Chevron Corp

iShares Semiconductor ETF

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Semiconductor ETF are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, IShares Semiconductor may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Chevron Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Pair Trading with IShares Semiconductor and Chevron Corp

The main advantage of trading using opposite IShares Semiconductor and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IShares Semiconductor 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 iShares Semiconductor ETF 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.