Correlation Between Exxon and Atacama Resources

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

Diversification Opportunities for Exxon and Atacama Resources

-0.47

Correlation Coefficient

Exxon  Atacama Resources

Very good diversification

The 3 months correlation between Exxon and Atacama is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Atacama Resources Internationa in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Atacama Resources 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 Atacama Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Atacama Resources has no effect on the direction of Exxon i.e., Exxon and Atacama Resources go up and down completely randomly.

Pair Corralation between Exxon and Atacama Resources

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Atacama Resources. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 20.34 times less risky than Atacama Resources. The stock trades about 0.0 of its potential returns per unit of risk. The Atacama Resources International is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  0.17  in Atacama Resources International on September 15, 2024 and sell it today you would earn a total of  0.23  from holding Atacama Resources International or generate 135.29% 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 Corp  vs.  Atacama Resources Internationa

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

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

Atacama Resources

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Atacama Resources International are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile basic indicators, Atacama Resources disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Atacama Resources

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

The idea behind Exxon Mobil Corp and Atacama Resources International 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 .