Correlation Between Chevron Corp and Walmart

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

Diversification Opportunities for Chevron Corp and Walmart

0.03
  Correlation Coefficient

Significant diversification

The 3 months correlation between Chevron and Walmart is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Walmart in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Walmart 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 Walmart. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Walmart has no effect on the direction of Chevron Corp i.e., Chevron Corp and Walmart go up and down completely randomly.

Pair Corralation between Chevron Corp and Walmart

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.4 times more return on investment than Walmart. However, Chevron Corp is 1.4 times more volatile than Walmart. It trades about 0.08 of its potential returns per unit of risk. Walmart is currently generating about 0.02 per unit of risk. If you would invest  7,792  in Chevron Corp on May 18, 2022 and sell it today you would earn a total of  7,849  from holding Chevron Corp or generate 100.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  Walmart

 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 current stock price disturbance, may contribute to short-term losses for the investors.

Chevron Price Channel

Walmart 
Walmart Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Walmart are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively sluggish primary indicators, Walmart unveiled solid returns over the last few months and may actually be approaching a breakup point.

Walmart Price Channel

Chevron Corp and Walmart Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Walmart

The main advantage of trading using opposite Chevron Corp and Walmart positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Walmart 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 Walmart will offset losses from the drop in Walmart's long position.
The idea behind Chevron Corp and Walmart 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.
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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.

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