Correlation Between Exxon and Entourage Health

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

Diversification Opportunities for Exxon and Entourage Health

-0.36

Correlation Coefficient

Exxon  Entourage Health

Very good diversification

The 3 months correlation between Exxon and Entourage is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Entourage Health Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Entourage Health Corp 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 Entourage Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Entourage Health Corp has no effect on the direction of Exxon i.e., Exxon and Entourage Health go up and down completely randomly.

Pair Corralation between Exxon and Entourage Health

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Entourage Health. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 30.82 times less risky than Entourage Health. The stock trades about -0.26 of its potential returns per unit of risk. The Entourage Health Corp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  0.58  in Entourage Health Corp on September 12, 2024 and sell it today you would earn a total of  0.20  from holding Entourage Health Corp or generate 34.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Exxon Mobil Corp  vs.  Entourage Health Corp

Exxon Mobil Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) 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.

Entourage Health Corp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Entourage Health Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, Entourage Health reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Entourage Health

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

The idea behind Exxon Mobil Corp and Entourage Health Corp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.