Correlation Between Exxon and Westhaven Ventures

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

Diversification Opportunities for Exxon and Westhaven Ventures

-0.48

Correlation Coefficient

Exxon  Westhaven Ventures

Very good diversification

The 3 months correlation between Exxon and Westhaven is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Westhaven Ventures in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westhaven Ventures 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 Westhaven Ventures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westhaven Ventures has no effect on the direction of Exxon i.e., Exxon and Westhaven Ventures go up and down completely randomly.

Pair Corralation between Exxon and Westhaven Ventures

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.23 times more return on investment than Westhaven Ventures. However, EXXON MOBIL CDR is 4.33 times less risky than Westhaven Ventures. It trades about 0.05 of its potential returns per unit of risk. Westhaven Ventures is currently generating about -0.09 per unit of risk. If you would invest  2,128  in EXXON MOBIL CDR on September 4, 2024 and sell it today you would earn a total of  75.00  from holding EXXON MOBIL CDR or generate 3.52% 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.  Westhaven Ventures

EXXON MOBIL CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Westhaven Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Westhaven Ventures 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 fairly stable which may send shares a bit higher in January 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Exxon and Westhaven Ventures

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

The idea behind EXXON MOBIL CDR and Westhaven Ventures 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.