Correlation Between Exxon and NextSource Materials
Can any of the company-specific risk be diversified away by investing in both Exxon and NextSource Materials 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 NextSource Materials 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 NextSource Materials, you can compare the effects of market volatilities on Exxon and NextSource Materials 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 NextSource Materials. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and NextSource Materials.
Diversification Opportunities for Exxon and NextSource Materials
-0.47 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and NextSource is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and NextSource Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NextSource Materials 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 NextSource Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NextSource Materials has no effect on the direction of Exxon i.e., Exxon and NextSource Materials go up and down completely randomly.
Pair Corralation between Exxon and NextSource Materials
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.33 times more return on investment than NextSource Materials. However, Exxon Mobil Corp is 3.06 times less risky than NextSource Materials. It trades about 0.0 of its potential returns per unit of risk. NextSource Materials is currently generating about -0.04 per unit of risk. If you would invest 11,407 in Exxon Mobil Corp on September 9, 2024 and sell it today you would lose (50.00) from holding Exxon Mobil Corp or give up 0.44% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. NextSource Materials
Performance |
Timeline |
Exxon Mobil Corp |
NextSource Materials |
Exxon and NextSource Materials Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and NextSource Materials
The main advantage of trading using opposite Exxon and NextSource Materials positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, NextSource Materials 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 NextSource Materials will offset losses from the drop in NextSource Materials' long position.The idea behind Exxon Mobil Corp and NextSource Materials 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.NextSource Materials vs. Leading Edge Materials | NextSource Materials vs. Syrah Resources Limited | NextSource Materials vs. Mason Graphite | NextSource Materials vs. Graphite One |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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