Correlation Between Exxon and Dominion Lending

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

Diversification Opportunities for Exxon and Dominion Lending

0.05

Correlation Coefficient

Exxon  Dominion Lending

Significant diversification

The 3 months correlation between Exxon and Dominion is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Dominion Lending Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dominion Lending Centres 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 Dominion Lending. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dominion Lending Centres has no effect on the direction of Exxon i.e., Exxon and Dominion Lending go up and down completely randomly.

Pair Corralation between Exxon and Dominion Lending

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.56 times more return on investment than Dominion Lending. However, EXXON MOBIL CDR is 1.78 times less risky than Dominion Lending. It trades about 0.08 of its potential returns per unit of risk. Dominion Lending Centres is currently generating about 0.02 per unit of risk. If you would invest  1,978  in EXXON MOBIL CDR on December 24, 2024 and sell it today you would earn a total of  158.00  from holding EXXON MOBIL CDR or generate 7.99% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  Dominion Lending Centres

EXXON MOBIL CDR

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 6 (%) 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.

Dominion Lending Centres

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Dominion Lending Centres are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Dominion Lending 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 Dominion Lending

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

The idea behind EXXON MOBIL CDR and Dominion Lending Centres 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.