Correlation Between Exxon and Invesco Senior

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

Diversification Opportunities for Exxon and Invesco Senior

-0.78

Correlation Coefficient

Exxon  Invesco Senior

Pay attention - limited upside

The 3 months correlation between Exxon and Invesco is -0.78. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Invesco Senior Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco Senior Income 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 Invesco Senior. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco Senior Income has no effect on the direction of Exxon i.e., Exxon and Invesco Senior go up and down completely randomly.

Pair Corralation between Exxon and Invesco Senior

Considering the 90-day investment horizon Exxon is expected to generate 6.54 times less return on investment than Invesco Senior. In addition to that, Exxon is 1.57 times more volatile than Invesco Senior Income. It trades about 0.02 of its total potential returns per unit of risk. Invesco Senior Income is currently generating about 0.19 per unit of volatility. If you would invest  388.00  in Invesco Senior Income on September 3, 2024 and sell it today you would earn a total of  9.00  from holding Invesco Senior Income or generate 2.32% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Invesco Senior Income

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

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 latest stock price disarray, may contribute to short-term losses for the investors.

Invesco Senior Income

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invesco Senior Income has generated negative risk-adjusted returns adding no value to fund investors. Even with relatively invariable basic indicators, Invesco Senior is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Exxon and Invesco Senior

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

The idea behind Exxon Mobil Corp and Invesco Senior Income 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.