Correlation Between Exxon and Pacer Financial

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

Diversification Opportunities for Exxon and Pacer Financial

-0.49

Correlation Coefficient

Exxon  Pacer Financial

Very good diversification

The 3 months correlation between Exxon and Pacer is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Pacer Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pacer 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 Corp are associated (or correlated) with Pacer Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pacer Financial has no effect on the direction of Exxon i.e., Exxon and Pacer Financial go up and down completely randomly.

Pair Corralation between Exxon and Pacer Financial

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.1 times more return on investment than Pacer Financial. However, Exxon is 1.1 times more volatile than Pacer Financial. It trades about 0.01 of its potential returns per unit of risk. Pacer Financial is currently generating about 0.01 per unit of risk. If you would invest  10,417  in Exxon Mobil Corp on September 17, 2024 and sell it today you would earn a total of  402.50  from holding Exxon Mobil Corp or generate 3.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.25%
Values	Daily Returns

Exxon Mobil Corp  vs.  Pacer Financial

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.

Pacer Financial

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Pacer Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak basic indicators, Pacer Financial showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Pacer Financial

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

The idea behind Exxon Mobil Corp and Pacer Financial 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 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.