Correlation Between Exxon and Axcella Health

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

Diversification Opportunities for Exxon and Axcella Health

0.27
  Correlation Coefficient

Modest diversification

The 3 months correlation between Exxon and Axcella is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Axcella Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Axcella Health 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 Axcella Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Axcella Health has no effect on the direction of Exxon i.e., Exxon and Axcella Health go up and down completely randomly.

Pair Corralation between Exxon and Axcella Health

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.4 times more return on investment than Axcella Health. However, Exxon Mobil Corp is 2.49 times less risky than Axcella Health. It trades about 0.12 of its potential returns per unit of risk. Axcella Health is currently generating about 0.0 per unit of risk. If you would invest  3,149  in Exxon Mobil Corp on May 20, 2022 and sell it today you would earn a total of  6,290  from holding Exxon Mobil Corp or generate 199.75% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Axcella Health

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) 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 latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

Axcella Health 
Axcella Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Axcella Health are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Axcella Health sustained solid returns over the last few months and may actually be approaching a breakup point.

Axcella Price Channel

Exxon and Axcella Health Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Axcella Health

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

Axcella Health

Pair trading matchups for Axcella Health

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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.

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