Correlation Between Exxon and Verbund AG

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

Diversification Opportunities for Exxon and Verbund AG

0.29

Correlation Coefficient

Exxon  Verbund AG

Modest diversification

The 3 months correlation between Exxon and Verbund is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Verbund AG ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verbund AG ADR 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 Verbund AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verbund AG ADR has no effect on the direction of Exxon i.e., Exxon and Verbund AG go up and down completely randomly.

Pair Corralation between Exxon and Verbund AG

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.42 times more return on investment than Verbund AG. However, Exxon Mobil Corp is 2.38 times less risky than Verbund AG. It trades about 0.13 of its potential returns per unit of risk. Verbund AG ADR is currently generating about -0.03 per unit of risk. If you would invest  10,555  in Exxon Mobil Corp on December 26, 2024 and sell it today you would earn a total of  1,104  from holding Exxon Mobil Corp or generate 10.46% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Verbund AG ADR

Exxon Mobil Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Verbund AG ADR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Verbund AG ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Exxon and Verbund AG

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

The idea behind Exxon Mobil Corp and Verbund AG ADR 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.