Correlation Between Exxon and CD Projekt

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

Diversification Opportunities for Exxon and CD Projekt

-0.53

Correlation Coefficient

Exxon  CD Projekt

Excellent diversification

The 3 months correlation between Exxon and OTGLY is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and CD Projekt SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CD Projekt SA 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 CD Projekt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CD Projekt SA has no effect on the direction of Exxon i.e., Exxon and CD Projekt go up and down completely randomly.

Pair Corralation between Exxon and CD Projekt

Considering the 90-day investment horizon Exxon is expected to generate 1.67 times less return on investment than CD Projekt. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.87 times less risky than CD Projekt. It trades about 0.04 of its potential returns per unit of risk. CD Projekt SA is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  997.00  in CD Projekt SA on September 12, 2024 and sell it today you would earn a total of  191.00  from holding CD Projekt SA or generate 19.16% 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.  CD Projekt SA

Exxon Mobil Corp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) 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.

CD Projekt SA

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CD Projekt SA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile essential indicators, CD Projekt may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Exxon and CD Projekt

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

The idea behind Exxon Mobil Corp and CD Projekt SA 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 Global Correlations module to find global opportunities by holding instruments from different markets.