Correlation Between Exxon and Columbia Convertible

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

Diversification Opportunities for Exxon and Columbia Convertible

-0.24

Correlation Coefficient

Exxon  Columbia Convertible

Very good diversification

The 3 months correlation between Exxon and Columbia is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Columbia Convertible Securitie in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Columbia Convertible 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 Columbia Convertible. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Columbia Convertible has no effect on the direction of Exxon i.e., Exxon and Columbia Convertible go up and down completely randomly.

Pair Corralation between Exxon and Columbia Convertible

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.47 times more return on investment than Columbia Convertible. However, Exxon is 1.47 times more volatile than Columbia Convertible Securities. It trades about 0.28 of its potential returns per unit of risk. Columbia Convertible Securities is currently generating about 0.15 per unit of risk. If you would invest  10,630  in Exxon Mobil Corp on October 23, 2024 and sell it today you would earn a total of  551.00  from holding Exxon Mobil Corp or generate 5.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	94.74%
Values	Daily Returns

Exxon Mobil Corp  vs.  Columbia Convertible Securitie

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

Columbia Convertible

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Convertible Securities are ranked lower than 10 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong fundamental indicators, Columbia Convertible is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Columbia Convertible

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

The idea behind Exxon Mobil Corp and Columbia Convertible Securities 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.