Correlation Between Exxon and Aimia

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

By analyzing existing cross correlation between EXXON MOBIL CDR and Aimia Inc, you can compare the effects of market volatilities on Exxon and Aimia 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 Aimia. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Aimia.

Diversification Opportunities for Exxon and Aimia

-0.4

Correlation Coefficient

Exxon  Aimia

Very good diversification

The 3 months correlation between Exxon and Aimia is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Aimia Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aimia Inc 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 CDR are associated (or correlated) with Aimia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aimia Inc has no effect on the direction of Exxon i.e., Exxon and Aimia go up and down completely randomly.

Pair Corralation between Exxon and Aimia

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to under-perform the Aimia. But the stock apears to be less risky and, when comparing its historical volatility, EXXON MOBIL CDR is 1.71 times less risky than Aimia. The stock trades about -0.06 of its potential returns per unit of risk. The Aimia Inc is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  266.00  in Aimia Inc on September 26, 2024 and sell it today you would lose (3.00) from holding Aimia Inc or give up 1.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EXXON MOBIL CDR  vs.  Aimia Inc

EXXON MOBIL CDR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Aimia Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aimia Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Aimia is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Aimia

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

The idea behind EXXON MOBIL CDR and Aimia Inc 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.