Correlation Between Exxon and Chongqing Rural

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

Diversification Opportunities for Exxon and Chongqing Rural

-0.66

Correlation Coefficient

Exxon  Chongqing Rural

Excellent diversification

The 3 months correlation between Exxon and Chongqing is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Chongqing Rural Commercial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chongqing Rural Comm 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 Chongqing Rural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chongqing Rural Comm has no effect on the direction of Exxon i.e., Exxon and Chongqing Rural go up and down completely randomly.

Pair Corralation between Exxon and Chongqing Rural

Considering the 90-day investment horizon Exxon is expected to generate 191.17 times less return on investment than Chongqing Rural. But when comparing it to its historical volatility, Exxon Mobil Corp is 4.92 times less risky than Chongqing Rural. It trades about 0.0 of its potential returns per unit of risk. Chongqing Rural Commercial is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,626  in Chongqing Rural Commercial on October 4, 2024 and sell it today you would earn a total of  966.00  from holding Chongqing Rural Commercial or generate 59.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	54.38%
Values	Daily Returns

Exxon Mobil Corp  vs.  Chongqing Rural Commercial

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 weak 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.

Chongqing Rural Comm

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Chongqing Rural Commercial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile fundamental drivers, Chongqing Rural showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Chongqing Rural

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

The idea behind Exxon Mobil Corp and Chongqing Rural Commercial 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.