Correlation Between Exxon and Lithium Ionic
Can any of the company-specific risk be diversified away by investing in both Exxon and Lithium Ionic 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 Lithium Ionic 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 Lithium Ionic Corp, you can compare the effects of market volatilities on Exxon and Lithium Ionic 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 Lithium Ionic. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Lithium Ionic.
Diversification Opportunities for Exxon and Lithium Ionic
0.25 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Exxon and Lithium is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Lithium Ionic Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lithium Ionic 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 Lithium Ionic. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lithium Ionic Corp has no effect on the direction of Exxon i.e., Exxon and Lithium Ionic go up and down completely randomly.
Pair Corralation between Exxon and Lithium Ionic
Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Lithium Ionic. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 3.4 times less risky than Lithium Ionic. The stock trades about -0.06 of its potential returns per unit of risk. The Lithium Ionic Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 63.00 in Lithium Ionic Corp on December 1, 2024 and sell it today you would earn a total of 2.00 from holding Lithium Ionic Corp or generate 3.17% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 96.77% |
Values | Daily Returns |
Exxon Mobil Corp vs. Lithium Ionic Corp
Performance |
Timeline |
Exxon Mobil Corp |
Lithium Ionic Corp |
Exxon and Lithium Ionic Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and Lithium Ionic
The main advantage of trading using opposite Exxon and Lithium Ionic positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Lithium Ionic 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 Lithium Ionic will offset losses from the drop in Lithium Ionic's long position.Exxon vs. BP PLC ADR | Exxon vs. Shell PLC ADR | Exxon vs. Petroleo Brasileiro Petrobras | Exxon vs. Suncor Energy |
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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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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