Correlation Between Exxon and The Dreyfus

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

Diversification Opportunities for Exxon and The Dreyfus

0.68

Correlation Coefficient

Exxon  The Dreyfus

Poor diversification

The 3 months correlation between Exxon and The is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and The Dreyfus Sustainable in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Dreyfus Sustainable 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 The Dreyfus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Dreyfus Sustainable has no effect on the direction of Exxon i.e., Exxon and The Dreyfus go up and down completely randomly.

Pair Corralation between Exxon and The Dreyfus

Considering the 90-day investment horizon Exxon is expected to generate 1.4 times less return on investment than The Dreyfus. In addition to that, Exxon is 1.22 times more volatile than The Dreyfus Sustainable. It trades about 0.07 of its total potential returns per unit of risk. The Dreyfus Sustainable is currently generating about 0.12 per unit of volatility. If you would invest  1,562  in The Dreyfus Sustainable on August 31, 2024 and sell it today you would earn a total of  38.00  from holding The Dreyfus Sustainable or generate 2.43% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  The Dreyfus Sustainable

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp 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 new stock price disarray, may contribute to short-term losses for the investors.

The Dreyfus Sustainable

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in The Dreyfus Sustainable are ranked lower than 13 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak fundamental indicators, The Dreyfus may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Exxon and The Dreyfus

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

The idea behind Exxon Mobil Corp and The Dreyfus Sustainable 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.