Correlation Between Exxon and DANAHER

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Can any of the company-specific risk be diversified away by investing in both Exxon and DANAHER 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 DANAHER 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 DANAHER P 4375, you can compare the effects of market volatilities on Exxon and DANAHER 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 DANAHER. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and DANAHER.

Diversification Opportunities for Exxon and DANAHER

0.29
  Correlation Coefficient

Modest diversification

The 3 months correlation between Exxon and DANAHER is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and DANAHER P 4375 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DANAHER P 4375 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 DANAHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DANAHER P 4375 has no effect on the direction of Exxon i.e., Exxon and DANAHER go up and down completely randomly.

Pair Corralation between Exxon and DANAHER

Considering the 90-day investment horizon Exxon is expected to generate 468.07 times less return on investment than DANAHER. But when comparing it to its historical volatility, Exxon Mobil Corp is 74.71 times less risky than DANAHER. It trades about 0.01 of its potential returns per unit of risk. DANAHER P 4375 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  8,933  in DANAHER P 4375 on October 23, 2024 and sell it today you would earn a total of  441.00  from holding DANAHER P 4375 or generate 4.94% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy40.93%
ValuesDaily Returns

Exxon Mobil Corp  vs.  DANAHER P 4375

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.
DANAHER P 4375 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in DANAHER P 4375 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, DANAHER sustained solid returns over the last few months and may actually be approaching a breakup point.

Exxon and DANAHER Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and DANAHER

The main advantage of trading using opposite Exxon and DANAHER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, DANAHER 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 DANAHER will offset losses from the drop in DANAHER's long position.
The idea behind Exxon Mobil Corp and DANAHER P 4375 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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