Correlation Between American Century and Exxon

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Can any of the company-specific risk be diversified away by investing in both American Century and Exxon 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 American Century and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Century Strategic and Exxon Mobil Corp, you can compare the effects of market volatilities on American Century and Exxon 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 American Century with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Century and Exxon.

Diversification Opportunities for American Century and Exxon

0.57
  Correlation Coefficient

Very weak diversification

The 3 months correlation between American and Exxon is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding American Century Strategic and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and American Century 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 American Century Strategic are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of American Century i.e., American Century and Exxon go up and down completely randomly.

Pair Corralation between American Century and Exxon

Assuming the 90 days horizon American Century Strategic is expected to under-perform the Exxon. But the mutual fund apears to be less risky and, when comparing its historical volatility, American Century Strategic is 2.12 times less risky than Exxon. The mutual fund trades about -0.01 of its potential returns per unit of risk. The Exxon Mobil Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,048  in Exxon Mobil Corp on June 29, 2022 and sell it today you would earn a total of  5,514  from holding Exxon Mobil Corp or generate 180.91% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy99.8%
ValuesDaily Returns

American Century Strategic  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
American Century Str 
American Performance
0 of 100
Over the last 90 days American Century Strategic has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong forward indicators, American Century is not utilizing all of its potentials. The new stock price disturbance, may contribute to short-term losses for the investors.

American Price Channel

Exxon Mobil Corp 
Exxon Performance
0 of 100
Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

American Century and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with American Century and Exxon

The main advantage of trading using opposite American Century and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Century position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
American Century vs. International Business Machines
The idea behind American Century Strategic and Exxon Mobil Corp 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.
Exxon vs. Kibush Capital Corp
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.

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