Correlation Between Exxon and North American
Can any of the company-specific risk be diversified away by investing in both Exxon and North American 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 North American into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXXON MOBIL CDR and North American Financial, you can compare the effects of market volatilities on Exxon and North American 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 North American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and North American.
Diversification Opportunities for Exxon and North American
-0.51 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Exxon and North is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and North American Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North American Financial 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 CDR are associated (or correlated) with North American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North American Financial has no effect on the direction of Exxon i.e., Exxon and North American go up and down completely randomly.
Pair Corralation between Exxon and North American
Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to under-perform the North American. In addition to that, Exxon is 5.41 times more volatile than North American Financial. It trades about -0.06 of its total potential returns per unit of risk. North American Financial is currently generating about 0.52 per unit of volatility. If you would invest 1,005 in North American Financial on September 26, 2024 and sell it today you would earn a total of 76.00 from holding North American Financial or generate 7.56% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
EXXON MOBIL CDR vs. North American Financial
Performance |
Timeline |
EXXON MOBIL CDR |
North American Financial |
Exxon and North American Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and North American
The main advantage of trading using opposite Exxon and North American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, North American 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 North American will offset losses from the drop in North American's long position.Exxon vs. Aya Gold Silver | Exxon vs. Atrium Mortgage Investment | Exxon vs. Faction Investment Group | Exxon vs. Brookfield Office Properties |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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