Correlation Between Exxon and EBay

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

Diversification Opportunities for Exxon and EBay

0.42
  Correlation Coefficient

Very weak diversification

The 3 months correlation between Exxon and EBay is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and EBay Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EBay Inc 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 EBay. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EBay Inc has no effect on the direction of Exxon i.e., Exxon and EBay go up and down completely randomly.

Pair Corralation between Exxon and EBay

Considering the 90-day investment horizon Exxon is expected to generate 1.9 times less return on investment than EBay. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.03 times less risky than EBay. It trades about 0.04 of its potential returns per unit of risk. EBay Inc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  4,489  in EBay Inc on May 14, 2022 and sell it today you would earn a total of  455.00  from holding EBay Inc or generate 10.14% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  EBay Inc

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) 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 new stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

EBay Inc 
EBay Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in EBay Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, EBay may actually be approaching a critical reversion point that can send shares even higher in September 2022.

EBay Price Channel

Exxon and EBay Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and EBay

The main advantage of trading using opposite Exxon and EBay positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, EBay 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 EBay will offset losses from the drop in EBay's long position.
The idea behind Exxon Mobil Corp and EBay Inc 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.
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 Commodity Channel Index module to use Commodity Channel Index to analyze current equity momentum.

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