Correlation Between Exxon and Income Fund

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

Diversification Opportunities for Exxon and Income Fund

0.76
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exxon and Income is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and The Income Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Income Fund 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 Income Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Income Fund has no effect on the direction of Exxon i.e., Exxon and Income Fund go up and down completely randomly.

Pair Corralation between Exxon and Income Fund

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 3.15 times more return on investment than Income Fund. However, Exxon is 3.15 times more volatile than The Income Fund. It trades about 0.02 of its potential returns per unit of risk. The Income Fund is currently generating about 0.02 per unit of risk. If you would invest  9,299  in Exxon Mobil Corp on May 21, 2022 and sell it today you would earn a total of  139.00  from holding Exxon Mobil Corp or generate 1.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  The Income Fund

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The current stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Income Fund 
Income Performance
1 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in The Income Fund are ranked lower than 1 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Income Fund is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Income Price Channel

Exxon and Income Fund Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Income Fund

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

The Income Fund

Pair trading matchups for Income Fund

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 Focused Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.

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