Correlation Between Applied Materials and Exxon
Can any of the company-specific risk be diversified away by investing in both Applied Materials and Exxon 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 Applied Materials and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Applied Materials and Exxon Mobil, you can compare the effects of market volatilities on Applied Materials and Exxon 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 Applied Materials with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Applied Materials and Exxon.
Diversification Opportunities for Applied Materials and Exxon
-0.06 | Correlation Coefficient |
Good diversification
The 3 months correlation between Applied and Exxon is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Applied Materials and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Applied Materials 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 Applied Materials are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Applied Materials i.e., Applied Materials and Exxon go up and down completely randomly.
Pair Corralation between Applied Materials and Exxon
Assuming the 90 days trading horizon Applied Materials is expected to under-perform the Exxon. In addition to that, Applied Materials is 1.95 times more volatile than Exxon Mobil. It trades about -0.01 of its total potential returns per unit of risk. Exxon Mobil is currently generating about 0.07 per unit of volatility. If you would invest 236,143 in Exxon Mobil on September 3, 2024 and sell it today you would earn a total of 4,357 from holding Exxon Mobil or generate 1.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Applied Materials vs. Exxon Mobil
Performance |
| Timeline |
| Applied Materials |
| Exxon Mobil |
Applied Materials and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Applied Materials and Exxon
The main advantage of trading using opposite Applied Materials and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Applied Materials position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| Applied Materials vs. The Select Sector | Applied Materials vs. Promotora y Operadora | Applied Materials vs. SPDR Series Trust | Applied Materials vs. Vanguard World |
| Exxon vs. GMxico Transportes SAB | Exxon vs. Deutsche Bank Aktiengesellschaft | Exxon vs. Grupo Hotelero Santa | Exxon vs. Hoteles City Express |
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 the Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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