Correlation Between Exxon and Farfetch

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

Diversification Opportunities for Exxon and Farfetch

0.72
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exxon and Farfetch is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Farfetch Ltd Cl in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farfetch Ltd Cl 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 Farfetch. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farfetch Ltd Cl has no effect on the direction of Exxon i.e., Exxon and Farfetch go up and down completely randomly.

Pair Corralation between Exxon and Farfetch

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.41 times more return on investment than Farfetch. However, Exxon Mobil Corp is 2.42 times less risky than Farfetch. It trades about -0.17 of its potential returns per unit of risk. Farfetch Ltd Cl is currently generating about -0.2 per unit of risk. If you would invest  9,631  in Exxon Mobil Corp on July 1, 2022 and sell it today you would lose (745.00)  from holding Exxon Mobil Corp or give up 7.74% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Farfetch Ltd Cl

 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

Farfetch Ltd Cl 
Farfetch Performance
4 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Farfetch Ltd Cl are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental indicators, Farfetch reported solid returns over the last few months and may actually be approaching a breakup point.

Farfetch Price Channel

Exxon and Farfetch Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Farfetch

The main advantage of trading using opposite Exxon and Farfetch positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Farfetch 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 Farfetch will offset losses from the drop in Farfetch's long position.
Exxon vs. Chevron Corp
The idea behind Exxon Mobil Corp and Farfetch Ltd Cl 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.
Farfetch vs. Amazon Inc
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.

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