Correlation Between Exxon and Ameriprise Financial

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

Diversification Opportunities for Exxon and Ameriprise Financial

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Exxon and Ameriprise is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Ameriprise Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ameriprise Financial 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 Ameriprise Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ameriprise Financial has no effect on the direction of Exxon i.e., Exxon and Ameriprise Financial go up and down completely randomly.

Pair Corralation between Exxon and Ameriprise Financial

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.04 times more return on investment than Ameriprise Financial. However, Exxon is 1.04 times more volatile than Ameriprise Financial Services. It trades about 0.11 of its potential returns per unit of risk. Ameriprise Financial Services is currently generating about 0.07 per unit of risk. If you would invest  3,987  in Exxon Mobil Corp on September 1, 2022 and sell it today you would earn a total of  7,067  from holding Exxon Mobil Corp or generate 177.25% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Ameriprise Financial Services

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Ameriprise Financial 
Ameriprise Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating primary indicators, Ameriprise Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Ameriprise Price Channel

Exxon and Ameriprise Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Ameriprise Financial

The main advantage of trading using opposite Exxon and Ameriprise Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Ameriprise Financial 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 Ameriprise Financial will offset losses from the drop in Ameriprise Financial's long position.
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The idea behind Exxon Mobil Corp and Ameriprise Financial Services 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.

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