Correlation Between Exxon and Sprott Physical

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

Diversification Opportunities for Exxon and Sprott Physical

-0.41

Correlation Coefficient

Exxon  Sprott Physical

Very good diversification

The 3 months correlation between Exxon and Sprott is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Sprott Physical Gold in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sprott Physical Gold 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 Sprott Physical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sprott Physical Gold has no effect on the direction of Exxon i.e., Exxon and Sprott Physical go up and down completely randomly.

Pair Corralation between Exxon and Sprott Physical

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to under-perform the Sprott Physical. But the stock apears to be less risky and, when comparing its historical volatility, EXXON MOBIL CDR is 1.01 times less risky than Sprott Physical. The stock trades about -0.39 of its potential returns per unit of risk. The Sprott Physical Gold is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,842  in Sprott Physical Gold on October 6, 2024 and sell it today you would earn a total of  93.00  from holding Sprott Physical Gold or generate 3.27% return on investment over 90 days.

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

EXXON MOBIL CDR  vs.  Sprott Physical Gold

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 abnormal performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Sprott Physical Gold

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Sprott Physical Gold are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Sprott Physical 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 Sprott Physical

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

The idea behind EXXON MOBIL CDR and Sprott Physical Gold 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.