Correlation Between Chevron Corp and Alcoa Corp
Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Alcoa 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 Alcoa Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Alcoa Corp, you can compare the effects of market volatilities on Chevron Corp and Alcoa 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 Alcoa Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Alcoa Corp.
Diversification Opportunities for Chevron Corp and Alcoa Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Chevron and Alcoa is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Alcoa Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alcoa Corp 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 Alcoa Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alcoa Corp has no effect on the direction of Chevron Corp i.e., Chevron Corp and Alcoa Corp go up and down completely randomly.
Pair Corralation between Chevron Corp and Alcoa Corp
Considering the 90-day investment horizon Chevron Corp is expected to under-perform the Alcoa Corp. But the stock apears to be less risky and, when comparing its historical volatility, Chevron Corp is 1.87 times less risky than Alcoa Corp. The stock trades about -0.08 of its potential returns per unit of risk. The Alcoa Corp is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 3,087 in Alcoa Corp on March 9, 2025 and sell it today you would lose (286.00) from holding Alcoa Corp or give up 9.26% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Chevron Corp vs. Alcoa Corp
Performance |
| Timeline |
| Chevron Corp |
| Alcoa Corp |
Chevron Corp and Alcoa Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron Corp and Alcoa Corp
The main advantage of trading using opposite Chevron Corp and Alcoa Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Alcoa 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 Alcoa Corp will offset losses from the drop in Alcoa Corp's long position.| Chevron Corp vs. BP PLC ADR | Chevron Corp vs. Shell PLC ADR | Chevron Corp vs. Petroleo Brasileiro Petrobras | Chevron Corp vs. Suncor Energy |
| Alcoa Corp vs. United States Steel | Alcoa Corp vs. Reliance Steel Aluminum | Alcoa Corp vs. ArcelorMittal SA ADR | Alcoa Corp vs. Commercial Metals |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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