Correlation Between Exxon and Pieridae Energy

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

Diversification Opportunities for Exxon and Pieridae Energy

-0.74
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Exxon and Pieridae is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Pieridae Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pieridae Energy 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 Pieridae Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pieridae Energy has no effect on the direction of Exxon i.e., Exxon and Pieridae Energy go up and down completely randomly.

Pair Corralation between Exxon and Pieridae Energy

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.54 times more return on investment than Pieridae Energy. However, EXXON MOBIL CDR is 1.85 times less risky than Pieridae Energy. It trades about 0.14 of its potential returns per unit of risk. Pieridae Energy is currently generating about 0.07 per unit of risk. If you would invest  1,988  in EXXON MOBIL CDR on October 23, 2024 and sell it today you would earn a total of  94.00  from holding EXXON MOBIL CDR or generate 4.73% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

EXXON MOBIL CDR  vs.  Pieridae Energy

 Performance 
       Timeline  
EXXON MOBIL CDR 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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 latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.
Pieridae Energy 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Pieridae Energy are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Pieridae Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Exxon and Pieridae Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Pieridae Energy

The main advantage of trading using opposite Exxon and Pieridae Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Pieridae Energy 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 Pieridae Energy will offset losses from the drop in Pieridae Energy's long position.
The idea behind EXXON MOBIL CDR and Pieridae Energy 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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