Correlation Between Exxon and Infineon Technologies

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

Diversification Opportunities for Exxon and Infineon Technologies

-0.47

Correlation Coefficient

Exxon  Infineon Technologies

Very good diversification

The 3 months correlation between Exxon and Infineon is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Infineon Technologies AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Infineon Technologies 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 Infineon Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Infineon Technologies has no effect on the direction of Exxon i.e., Exxon and Infineon Technologies go up and down completely randomly.

Pair Corralation between Exxon and Infineon Technologies

Considering the 90-day investment horizon Exxon is expected to generate 1.04 times less return on investment than Infineon Technologies. But when comparing it to its historical volatility, Exxon Mobil Corp is 2.64 times less risky than Infineon Technologies. It trades about 0.32 of its potential returns per unit of risk. Infineon Technologies AG is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  3,250  in Infineon Technologies AG on October 22, 2024 and sell it today you would earn a total of  175.00  from holding Infineon Technologies AG or generate 5.38% 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.  Infineon Technologies AG

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

Infineon Technologies

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Infineon Technologies AG are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Infineon Technologies may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Exxon and Infineon Technologies

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

The idea behind Exxon Mobil Corp and Infineon Technologies AG 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.