Correlation Between Exxon and Global Acquisitions

Can any of the company-specific risk be diversified away by investing in both Exxon and Global Acquisitions 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 Global Acquisitions into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exxon Mobil Corp and Global Acquisitions, you can compare the effects of market volatilities on Exxon and Global Acquisitions 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 Global Acquisitions. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Global Acquisitions.

Diversification Opportunities for Exxon and Global Acquisitions

-0.35

Correlation Coefficient

Exxon  Global Acquisitions

Very good diversification

The 3 months correlation between Exxon and Global is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Global Acquisitions in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Acquisitions 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 Corp are associated (or correlated) with Global Acquisitions. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Acquisitions has no effect on the direction of Exxon i.e., Exxon and Global Acquisitions go up and down completely randomly.

Pair Corralation between Exxon and Global Acquisitions

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.07 times more return on investment than Global Acquisitions. However, Exxon Mobil Corp is 13.83 times less risky than Global Acquisitions. It trades about 0.32 of its potential returns per unit of risk. Global Acquisitions is currently generating about -0.1 per unit of risk. If you would invest  10,630  in Exxon Mobil Corp on October 24, 2024 and sell it today you would earn a total of  602.00  from holding Exxon Mobil Corp or generate 5.66% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Global Acquisitions

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil Corp 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 latest stock price disarray, may contribute to short-term losses for the investors.

Global Acquisitions

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Global Acquisitions are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Global Acquisitions reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Global Acquisitions

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

The idea behind Exxon Mobil Corp and Global Acquisitions 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.