Correlation Between Chevron Corp and Intel Corp

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

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

Diversification Opportunities for Chevron Corp and Intel Corp

0.6

Correlation Coefficient

Chevron Corp  Intel Corp

Poor diversification

The 3 months correlation between Chevron and Intel is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp CEDEAR and Intel Corp CEDEAR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel Corp CEDEAR 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 CEDEAR are associated (or correlated) with Intel Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel Corp CEDEAR has no effect on the direction of Chevron Corp i.e., Chevron Corp and Intel Corp go up and down completely randomly.

Pair Corralation between Chevron Corp and Intel Corp

Assuming the 90 days trading horizon Chevron Corp CEDEAR is expected to generate 0.43 times more return on investment than Intel Corp. However, Chevron Corp CEDEAR is 2.34 times less risky than Intel Corp. It trades about 0.19 of its potential returns per unit of risk. Intel Corp CEDEAR is currently generating about -0.37 per unit of risk. If you would invest  1,075,550  in Chevron Corp CEDEAR on January 30, 2024 and sell it today you would earn a total of  50,100  from holding Chevron Corp CEDEAR or generate 4.66% return on investment over 90 days.

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

Chevron Corp CEDEAR  vs.  Intel Corp CEDEAR

Chevron Corp CEDEAR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Intel Corp CEDEAR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Intel Corp CEDEAR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Chevron Corp and Intel Corp

The main advantage of trading using opposite Chevron Corp and Intel Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Intel 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 Intel Corp will offset losses from the drop in Intel Corp's long position.

The idea behind Chevron Corp CEDEAR and Intel 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.