Correlation Between Exxon and ARCHER

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

Diversification Opportunities for Exxon and ARCHER

-0.58

Correlation Coefficient

Exxon  ARCHER

Excellent diversification

The 3 months correlation between Exxon and ARCHER is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and ARCHER DANIELS MIDLAND in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ARCHER DANIELS MIDLAND 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 ARCHER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ARCHER DANIELS MIDLAND has no effect on the direction of Exxon i.e., Exxon and ARCHER go up and down completely randomly.

Pair Corralation between Exxon and ARCHER

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 2.38 times more return on investment than ARCHER. However, Exxon is 2.38 times more volatile than ARCHER DANIELS MIDLAND. It trades about 0.03 of its potential returns per unit of risk. ARCHER DANIELS MIDLAND is currently generating about 0.0 per unit of risk. If you would invest  9,920  in Exxon Mobil Corp on August 31, 2024 and sell it today you would earn a total of  1,846  from holding Exxon Mobil Corp or generate 18.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	97.37%
Values	Daily Returns

Exxon Mobil Corp  vs.  ARCHER DANIELS MIDLAND

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) 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 new stock price disarray, may contribute to short-term losses for the investors.

ARCHER DANIELS MIDLAND

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARCHER DANIELS MIDLAND has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, ARCHER is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and ARCHER

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

The idea behind Exxon Mobil Corp and ARCHER DANIELS MIDLAND 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.