Correlation Between Exxon and Firan Technology

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

Diversification Opportunities for Exxon and Firan Technology

-0.21

Correlation Coefficient

Exxon  Firan Technology

Very good diversification

The 3 months correlation between Exxon and Firan is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Firan Technology Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Firan Technology 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 Firan Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Firan Technology has no effect on the direction of Exxon i.e., Exxon and Firan Technology go up and down completely randomly.

Pair Corralation between Exxon and Firan Technology

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.62 times more return on investment than Firan Technology. However, EXXON MOBIL CDR is 1.61 times less risky than Firan Technology. It trades about 0.04 of its potential returns per unit of risk. Firan Technology Group is currently generating about -0.14 per unit of risk. If you would invest  1,980  in EXXON MOBIL CDR on December 4, 2024 and sell it today you would earn a total of  18.00  from holding EXXON MOBIL CDR or generate 0.91% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  Firan Technology Group

EXXON MOBIL CDR

Risk-Adjusted Performance

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 current stock price disarray, may contribute to short-term losses for the investors.

Firan Technology

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Exxon and Firan Technology

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

The idea behind EXXON MOBIL CDR and Firan Technology Group 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 the Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.