Correlation Between Exxon and Stria Lithium

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

Diversification Opportunities for Exxon and Stria Lithium

-0.77

Correlation Coefficient

Exxon  Stria Lithium

Pay attention - limited upside

The 3 months correlation between Exxon and Stria is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Stria Lithium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stria Lithium 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 Stria Lithium. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stria Lithium has no effect on the direction of Exxon i.e., Exxon and Stria Lithium go up and down completely randomly.

Pair Corralation between Exxon and Stria Lithium

Considering the 90-day investment horizon Exxon is expected to generate 2.88 times less return on investment than Stria Lithium. But when comparing it to its historical volatility, Exxon Mobil Corp is 9.01 times less risky than Stria Lithium. It trades about 0.04 of its potential returns per unit of risk. Stria Lithium is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  6.25  in Stria Lithium on September 1, 2024 and sell it today you would lose (2.11) from holding Stria Lithium or give up 33.76% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Exxon Mobil Corp  vs.  Stria Lithium

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Stria Lithium

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stria Lithium are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Stria Lithium may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Exxon and Stria Lithium

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

The idea behind Exxon Mobil Corp and Stria Lithium 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.