Correlation Between Exxon Mobil and Tencent Holdings
Can any of the company-specific risk be diversified away by investing in both Exxon Mobil and Tencent Holdings 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 Mobil and Tencent Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil and Tencent Holdings, you can compare the effects of market volatilities on Exxon Mobil and Tencent Holdings 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 Mobil with a short position of Tencent Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon Mobil and Tencent Holdings.
Diversification Opportunities for Exxon Mobil and Tencent Holdings
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Exxon and Tencent is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Tencent Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tencent Holdings and Exxon Mobil 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 are associated (or correlated) with Tencent Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tencent Holdings has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and Tencent Holdings go up and down completely randomly.
Pair Corralation between Exxon Mobil and Tencent Holdings
Assuming the 90 days trading horizon Exxon Mobil is expected to under-perform the Tencent Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil is 1.72 times less risky than Tencent Holdings. The stock trades about -0.02 of its potential returns per unit of risk. The Tencent Holdings is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 4,815 in Tencent Holdings on September 24, 2024 and sell it today you would earn a total of 460.00 from holding Tencent Holdings or generate 9.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil vs. Tencent Holdings
Performance |
Timeline |
Exxon Mobil |
Tencent Holdings |
Exxon Mobil and Tencent Holdings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon Mobil and Tencent Holdings
The main advantage of trading using opposite Exxon Mobil and Tencent Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon Mobil position performs unexpectedly, Tencent Holdings 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 Tencent Holdings will offset losses from the drop in Tencent Holdings' long position.Exxon Mobil vs. Apple Inc | Exxon Mobil vs. Apple Inc | Exxon Mobil vs. Apple Inc | Exxon Mobil vs. Apple Inc |
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Check out your portfolio center.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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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