Correlation Between Exxon and Visa

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

Diversification Opportunities for Exxon and Visa

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Exxon and Visa is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa 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 Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Exxon i.e., Exxon and Visa go up and down completely randomly.

Pair Corralation between Exxon and Visa

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Visa. In addition to that, Exxon is 1.65 times more volatile than Visa Inc. It trades about -0.1 of its total potential returns per unit of risk. Visa Inc is currently generating about 0.11 per unit of volatility. If you would invest  19,951  in Visa Inc on May 11, 2022 and sell it today you would earn a total of  1,381  from holding Visa Inc or generate 6.92% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy97.56%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Visa Inc

 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

Visa Inc 
Visa Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Visa may actually be approaching a critical reversion point that can send shares even higher in September 2022.

Visa Price Channel

Exxon and Visa Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Visa

The main advantage of trading using opposite Exxon and Visa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Visa 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 Visa will offset losses from the drop in Visa's long position.
The idea behind Exxon Mobil Corp and Visa 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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