Correlation Between Long Term and Exxon

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

Diversification Opportunities for Long Term and Exxon

-0.43
  Correlation Coefficient

Very good diversification

The 3 months correlation between Long Term and Exxon is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Long Term Bond 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 Long Term 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 Long Term Bond 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 Long Term i.e., Long Term and Exxon go up and down completely randomly.

Pair Corralation between Long Term and Exxon

Considering the 90-day investment horizon Long Term Bond is expected to under-perform the Exxon. But the etf apears to be less risky and, when comparing its historical volatility, Long Term Bond is 2.35 times less risky than Exxon. The etf trades about -0.07 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  3,827  in Exxon Mobil Corp on August 30, 2022 and sell it today you would earn a total of  7,154  from holding Exxon Mobil Corp or generate 186.93% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Long Term Bond  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
Long Term Bond 
Long Term Performance
0 of 100
Over the last 90 days Long Term Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable essential indicators, Long Term is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Long Term Price Channel

Exxon Mobil Corp 
Exxon Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Long Term and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Long Term and Exxon

The main advantage of trading using opposite Long Term and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Long Term 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 Long Term Bond 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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