Correlation Between Exxon and General Environmental

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

Diversification Opportunities for Exxon and General Environmental

0.3

Correlation Coefficient

Exxon  General Environmental

Weak diversification

The 3 months correlation between Exxon and General is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and General Environmental Manageme in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on General Environmental 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 General Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of General Environmental has no effect on the direction of Exxon i.e., Exxon and General Environmental go up and down completely randomly.

Pair Corralation between Exxon and General Environmental

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.15 times more return on investment than General Environmental. However, Exxon Mobil Corp is 6.6 times less risky than General Environmental. It trades about -0.06 of its potential returns per unit of risk. General Environmental Management is currently generating about -0.01 per unit of risk. If you would invest  11,048  in Exxon Mobil Corp on November 19, 2024 and sell it today you would lose (224.00) from holding Exxon Mobil Corp or give up 2.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Exxon Mobil Corp  vs.  General Environmental Manageme

Exxon Mobil Corp

Risk-Adjusted Performance

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 latest conflicting performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

General Environmental

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in General Environmental Management are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent basic indicators, General Environmental demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and General Environmental

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

The idea behind Exxon Mobil Corp and General Environmental Management 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.