Correlation Between Bed Bath and Exxon

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

Diversification Opportunities for Bed Bath and Exxon

0.47
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Bed Bath and Exxon is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Bed Bath Beyond 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 Bed Bath 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 Bed Bath Beyond 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 Bed Bath i.e., Bed Bath and Exxon go up and down completely randomly.

Pair Corralation between Bed Bath and Exxon

Given the investment horizon of 90 days Bed Bath is expected to generate 2.82 times less return on investment than Exxon. In addition to that, Bed Bath is 3.62 times more volatile than Exxon Mobil Corp. It trades about 0.01 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.1 per unit of volatility. If you would invest  3,070  in Exxon Mobil Corp on June 26, 2022 and sell it today you would earn a total of  5,505  from holding Exxon Mobil Corp or generate 179.32% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Bed Bath Beyond  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
Bed Bath Beyond 
Bed Bath Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Bed Bath Beyond are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, Bed Bath showed solid returns over the last few months and may actually be approaching a breakup point.

Bed Bath 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

Bed Bath and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Bed Bath and Exxon

The main advantage of trading using opposite Bed Bath and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bed Bath 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.
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The idea behind Bed Bath Beyond 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.
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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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