Correlation Between Exxon and Invesco Total

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

Diversification Opportunities for Exxon and Invesco Total

-0.58

Correlation Coefficient

Exxon  Invesco Total

Excellent diversification

The 3 months correlation between Exxon and Invesco is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Invesco Total Return in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Total Return 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 Invesco Total. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Total Return has no effect on the direction of Exxon i.e., Exxon and Invesco Total go up and down completely randomly.

Pair Corralation between Exxon and Invesco Total

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 4.8 times more return on investment than Invesco Total. However, Exxon is 4.8 times more volatile than Invesco Total Return. It trades about 0.01 of its potential returns per unit of risk. Invesco Total Return is currently generating about -0.02 per unit of risk. If you would invest  11,698  in Exxon Mobil Corp on August 30, 2024 and sell it today you would earn a total of  68.00  from holding Exxon Mobil Corp or generate 0.58% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Invesco Total Return

Exxon Mobil Corp

Risk-Adjusted Performance

1 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) 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 current stock price disarray, may contribute to short-term losses for the investors.

Invesco Total Return

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Total Return has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Invesco Total is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Invesco Total

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

The idea behind Exxon Mobil Corp and Invesco Total Return 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..