Correlation Between Exxon and Storage Vault

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

Diversification Opportunities for Exxon and Storage Vault

-0.41

Correlation Coefficient

Exxon  Storage Vault

Very good diversification

The 3 months correlation between Exxon and Storage is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Storage Vault Canada in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Storage Vault Canada 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 Storage Vault. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Storage Vault Canada has no effect on the direction of Exxon i.e., Exxon and Storage Vault go up and down completely randomly.

Pair Corralation between Exxon and Storage Vault

Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.67 times more return on investment than Storage Vault. However, EXXON MOBIL CDR is 1.49 times less risky than Storage Vault. It trades about 0.05 of its potential returns per unit of risk. Storage Vault Canada is currently generating about -0.12 per unit of risk. If you would invest  2,150  in EXXON MOBIL CDR on August 31, 2024 and sell it today you would earn a total of  75.00  from holding EXXON MOBIL CDR or generate 3.49% 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.  Storage Vault Canada

EXXON MOBIL CDR

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR 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.

Storage Vault Canada

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Storage Vault Canada has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's forward indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Exxon and Storage Vault

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

The idea behind EXXON MOBIL CDR and Storage Vault Canada 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.