Correlation Between Exxon and Swiss Re

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

Diversification Opportunities for Exxon and Swiss Re

-0.43

Correlation Coefficient

Exxon  Swiss Re

Very good diversification

The 3 months correlation between Exxon and Swiss is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Swiss Re in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swiss Re 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 Swiss Re. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swiss Re has no effect on the direction of Exxon i.e., Exxon and Swiss Re go up and down completely randomly.

Pair Corralation between Exxon and Swiss Re

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Swiss Re. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.34 times less risky than Swiss Re. The stock trades about -0.07 of its potential returns per unit of risk. The Swiss Re is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,421  in Swiss Re on September 20, 2024 and sell it today you would earn a total of  275.00  from holding Swiss Re or generate 8.04% 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.  Swiss Re

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.

Swiss Re

Risk-Adjusted Performance

6 of 100

Modest

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

Pair Trading with Exxon and Swiss Re

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

The idea behind Exxon Mobil Corp and Swiss Re 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.