Correlation Between Exxon and Long-Term Govt

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

Diversification Opportunities for Exxon and Long-Term Govt

-0.57
  Correlation Coefficient

Excellent diversification

The 3 months correlation between Exxon and Long-Term is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Long-Term Govt Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Long-Term Govt Bond 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 Long-Term Govt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Long-Term Govt Bond has no effect on the direction of Exxon i.e., Exxon and Long-Term Govt go up and down completely randomly.

Pair Corralation between Exxon and Long-Term Govt

Considering the 90-day investment horizon Exxon is expected to generate 1.8 times less return on investment than Long-Term Govt. In addition to that, Exxon is 1.38 times more volatile than Long-Term Govt Bond. It trades about 0.1 of its total potential returns per unit of risk. Long-Term Govt Bond is currently generating about 0.24 per unit of volatility. If you would invest  5,966  in Long-Term Govt Bond on August 29, 2022 and sell it today you would earn a total of  379.00  from holding Long-Term Govt Bond or generate 6.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Long-Term Govt Bond

 Performance (%) 
       Timeline  
Exxon Mobil Corp 
Exxon Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Long-Term Govt Bond 
Long-Term Performance
0 of 100
Over the last 90 days Long-Term Govt Bond has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Etf's essential indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the exchange-traded fund private investors.

Long-Term Price Channel

Exxon and Long-Term Govt Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Long-Term Govt

The main advantage of trading using opposite Exxon and Long-Term Govt positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Long-Term Govt 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 Long-Term Govt will offset losses from the drop in Long-Term Govt's long position.
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The idea behind Exxon Mobil Corp and Long-Term Govt Bond 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.

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