Correlation Between Exxon and 5N Plus

Can any of the company-specific risk be diversified away by investing in both Exxon and 5N Plus 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 5N Plus 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 5N Plus, you can compare the effects of market volatilities on Exxon and 5N Plus 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 5N Plus. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and 5N Plus.

Diversification Opportunities for Exxon and 5N Plus

-0.41

Correlation Coefficient

Exxon  5N Plus

Very good diversification

The 3 months correlation between Exxon and VNP is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and 5N Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 5N Plus 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 5N Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 5N Plus has no effect on the direction of Exxon i.e., Exxon and 5N Plus go up and down completely randomly.

Pair Corralation between Exxon and 5N Plus

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.59 times more return on investment than 5N Plus. However, EXXON MOBIL CDR is 1.71 times less risky than 5N Plus. It trades about 0.1 of its potential returns per unit of risk. 5N Plus is currently generating about -0.16 per unit of risk. If you would invest  1,962  in EXXON MOBIL CDR on December 29, 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 Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

EXXON MOBIL CDR  vs.  5N Plus

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.

5N Plus

Risk-Adjusted Performance

Very Weak

Over the last 90 days 5N Plus has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in April 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Exxon and 5N Plus

The main advantage of trading using opposite Exxon and 5N Plus positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, 5N Plus 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 5N Plus will offset losses from the drop in 5N Plus' long position.

The idea behind EXXON MOBIL CDR and 5N Plus 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.