Correlation Between EQUINOR ASA and Chevron Corp

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

Diversification Opportunities for EQUINOR ASA and Chevron Corp

0.54
  Correlation Coefficient

Very weak diversification

The 3 months correlation between EQUINOR and Chevron is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding EQUINOR ASA and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp and EQUINOR ASA 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 EQUINOR ASA 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 EQUINOR ASA i.e., EQUINOR ASA and Chevron Corp go up and down completely randomly.

Pair Corralation between EQUINOR ASA and Chevron Corp

Assuming the 90 days horizon EQUINOR ASA is expected to generate 1.25 times more return on investment than Chevron Corp. However, EQUINOR ASA is 1.25 times more volatile than Chevron Corp. It trades about -0.02 of its potential returns per unit of risk. Chevron Corp is currently generating about -0.06 per unit of risk. If you would invest  3,612  in EQUINOR ASA on March 30, 2022 and sell it today you would lose (193.00)  from holding EQUINOR ASA or give up 5.34% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy98.39%
ValuesDaily Returns

EQUINOR ASA  vs.  Chevron Corp

 Performance (%) 
      Timeline 
EQUINOR ASA 
EQUINOR Performance
0 of 100
Over the last 90 days EQUINOR ASA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical indicators, EQUINOR ASA is not utilizing all of its potentials. The new stock price tumult, may contribute to shorter-term losses for the shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0233
Payout Ratio
0.5
Forward Annual Dividend Rate
0.8
Ex Dividend Date
2022-08-11

EQUINOR Price Channel

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0399
Payout Ratio
0.52
Last Split Factor
2:1
Forward Annual Dividend Rate
5.68
Dividend Date
2022-06-10
Ex Dividend Date
2022-05-18
Last Split Date
2004-09-13

Chevron Price Channel

EQUINOR ASA and Chevron Corp Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EQUINOR ASA and Chevron Corp

The main advantage of trading using opposite EQUINOR ASA and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQUINOR ASA 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 EQUINOR ASA 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.
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

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