Correlation Between Exxon and Cogeco Communications

Can any of the company-specific risk be diversified away by investing in both Exxon and Cogeco Communications 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 Cogeco Communications 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 Cogeco Communications, you can compare the effects of market volatilities on Exxon and Cogeco Communications 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 Cogeco Communications. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Cogeco Communications.

Diversification Opportunities for Exxon and Cogeco Communications

0.2

Correlation Coefficient

Exxon  Cogeco Communications

Modest diversification

The 3 months correlation between Exxon and Cogeco is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Cogeco Communications in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cogeco Communications 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 Cogeco Communications. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cogeco Communications has no effect on the direction of Exxon i.e., Exxon and Cogeco Communications go up and down completely randomly.

Pair Corralation between Exxon and Cogeco Communications

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 1.17 times more return on investment than Cogeco Communications. However, Exxon is 1.17 times more volatile than Cogeco Communications. It trades about 0.1 of its potential returns per unit of risk. Cogeco Communications is currently generating about 0.05 per unit of risk. If you would invest  1,962  in EXXON MOBIL CDR on December 30, 2024 and sell it today you would earn a total of  224.00  from holding EXXON MOBIL CDR or generate 11.42% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  Cogeco Communications

EXXON MOBIL CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Cogeco Communications

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cogeco Communications are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Cogeco Communications 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 Cogeco Communications

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

The idea behind EXXON MOBIL CDR and Cogeco Communications 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 CEOs Directory module to screen CEOs from public companies around the world.