Correlation Between Exxon and FibraHotel

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

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

Diversification Opportunities for Exxon and FibraHotel

-0.04

Correlation Coefficient

Exxon  FibraHotel

Good diversification

The 3 months correlation between Exxon and FibraHotel is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and FibraHotel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibraHotel and Exxon 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 Exxon Mobil are associated (or correlated) with FibraHotel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibraHotel has no effect on the direction of Exxon i.e., Exxon and FibraHotel go up and down completely randomly.

Pair Corralation between Exxon and FibraHotel

Assuming the 90 days trading horizon Exxon Mobil is expected to generate 0.52 times more return on investment than FibraHotel. However, Exxon Mobil is 1.93 times less risky than FibraHotel. It trades about 0.09 of its potential returns per unit of risk. FibraHotel is currently generating about 0.01 per unit of risk. If you would invest  213,842  in Exxon Mobil on December 24, 2024 and sell it today you would earn a total of  19,058  from holding Exxon Mobil or generate 8.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

Exxon Mobil  vs.  FibraHotel

Exxon Mobil

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

FibraHotel

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Exxon and FibraHotel

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

The idea behind Exxon Mobil and FibraHotel 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.