Correlation Between Chevron Corp and Carvana Co

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Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Carvana Co 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 Carvana Co into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Carvana Co Cl, you can compare the effects of market volatilities on Chevron Corp and Carvana Co 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 Carvana Co. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Carvana Co.

Diversification Opportunities for Chevron Corp and Carvana Co

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between Chevron and Carvana is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Carvana Co Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carvana Co Cl 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 Carvana Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carvana Co Cl has no effect on the direction of Chevron Corp i.e., Chevron Corp and Carvana Co go up and down completely randomly.

Pair Corralation between Chevron Corp and Carvana Co

Considering the 90-day investment horizon Chevron Corp is expected to generate 0.33 times more return on investment than Carvana Co. However, Chevron Corp is 3.04 times less risky than Carvana Co. It trades about 0.09 of its potential returns per unit of risk. Carvana Co Cl is currently generating about -0.04 per unit of risk. If you would invest  6,737  in Chevron Corp on June 26, 2022 and sell it today you would earn a total of  7,740  from holding Chevron Corp or generate 114.89% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy99.8%
ValuesDaily Returns

Chevron Corp  vs.  Carvana Co Cl

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
0 of 100
Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Chevron Corp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Carvana Co Cl 
Carvana Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Carvana Co Cl are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Carvana Co may actually be approaching a critical reversion point that can send shares even higher in October 2022.

Carvana Price Channel

Chevron Corp and Carvana Co Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Carvana Co

The main advantage of trading using opposite Chevron Corp and Carvana Co positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Carvana Co 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 Carvana Co will offset losses from the drop in Carvana Co's long position.
Chevron Corp vs. BUSHVELD MINERALS LTD
The idea behind Chevron Corp and Carvana Co Cl 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.
Carvana Co vs. BUSHVELD MINERALS LTD
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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