Correlation Between Exxon and Dimensional Global

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

Diversification Opportunities for Exxon and Dimensional Global

-0.43

Correlation Coefficient

Exxon  Dimensional Global

Very good diversification

The 3 months correlation between Exxon and Dimensional is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Dimensional Global Core in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dimensional Global Core 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 Dimensional Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dimensional Global Core has no effect on the direction of Exxon i.e., Exxon and Dimensional Global go up and down completely randomly.

Pair Corralation between Exxon and Dimensional Global

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Dimensional Global. In addition to that, Exxon is 4.08 times more volatile than Dimensional Global Core. It trades about -0.07 of its total potential returns per unit of risk. Dimensional Global Core is currently generating about -0.11 per unit of volatility. If you would invest  5,433  in Dimensional Global Core on September 19, 2024 and sell it today you would lose (112.00) from holding Dimensional Global Core or give up 2.06% of portfolio value over 90 days.

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

Exxon Mobil Corp  vs.  Dimensional Global Core

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 recent stock price disarray, may contribute to short-term losses for the investors.

Dimensional Global Core

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dimensional Global Core has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Dimensional Global is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Exxon and Dimensional Global

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

The idea behind Exxon Mobil Corp and Dimensional Global Core 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.