Correlation Between Exxon and K9 Gold

Can any of the company-specific risk be diversified away by investing in both Exxon and K9 Gold 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 K9 Gold 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 K9 Gold Corp, you can compare the effects of market volatilities on Exxon and K9 Gold 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 K9 Gold. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and K9 Gold.

Diversification Opportunities for Exxon and K9 Gold

-0.25

Correlation Coefficient

Exxon  K9 Gold

Very good diversification

The 3 months correlation between Exxon and WDFCF is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and K9 Gold Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on K9 Gold Corp 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 K9 Gold. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of K9 Gold Corp has no effect on the direction of Exxon i.e., Exxon and K9 Gold go up and down completely randomly.

Pair Corralation between Exxon and K9 Gold

Considering the 90-day investment horizon Exxon is expected to generate 417.88 times less return on investment than K9 Gold. But when comparing it to its historical volatility, Exxon Mobil Corp is 94.68 times less risky than K9 Gold. It trades about 0.03 of its potential returns per unit of risk. K9 Gold Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  27.00  in K9 Gold Corp on September 14, 2024 and sell it today you would lose (21.08) from holding K9 Gold Corp or give up 78.07% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	92.88%
Values	Daily Returns

Exxon Mobil Corp  vs.  K9 Gold Corp

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

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

K9 Gold Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days K9 Gold Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, K9 Gold is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Exxon and K9 Gold

The main advantage of trading using opposite Exxon and K9 Gold positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, K9 Gold 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 K9 Gold will offset losses from the drop in K9 Gold's long position.

The idea behind Exxon Mobil Corp and K9 Gold Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .