Correlation Between Exxon and HeadsUp Entertainment

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

Diversification Opportunities for Exxon and HeadsUp Entertainment

-0.27

Correlation Coefficient

Exxon  HeadsUp Entertainment

Very good diversification

The 3 months correlation between Exxon and HeadsUp is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and HeadsUp Entertainment Internat in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HeadsUp Entertainment 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 HeadsUp Entertainment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HeadsUp Entertainment has no effect on the direction of Exxon i.e., Exxon and HeadsUp Entertainment go up and down completely randomly.

Pair Corralation between Exxon and HeadsUp Entertainment

Considering the 90-day investment horizon Exxon is expected to generate 9.08 times less return on investment than HeadsUp Entertainment. But when comparing it to its historical volatility, Exxon Mobil Corp is 12.44 times less risky than HeadsUp Entertainment. It trades about 0.06 of its potential returns per unit of risk. HeadsUp Entertainment International is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  0.77  in HeadsUp Entertainment International on September 4, 2024 and sell it today you would lose (0.17) from holding HeadsUp Entertainment International or give up 22.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Exxon Mobil Corp  vs.  HeadsUp Entertainment Internat

Exxon Mobil Corp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 4 (%) 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.

HeadsUp Entertainment

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HeadsUp Entertainment International are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, HeadsUp Entertainment reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and HeadsUp Entertainment

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

The idea behind Exxon Mobil Corp and HeadsUp Entertainment 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.