Correlation Between Exxon Mobil and Oi SA
Can any of the company-specific risk be diversified away by investing in both Exxon Mobil and Oi SA 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 Mobil and Oi SA into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil and Oi SA, you can compare the effects of market volatilities on Exxon Mobil and Oi SA 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 Mobil with a short position of Oi SA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon Mobil and Oi SA.
Diversification Opportunities for Exxon Mobil and Oi SA
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Exxon and OIBR4 is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Oi SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Oi SA and Exxon Mobil 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 are associated (or correlated) with Oi SA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Oi SA has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and Oi SA go up and down completely randomly.
Pair Corralation between Exxon Mobil and Oi SA
Assuming the 90 days trading horizon Exxon Mobil is expected to generate 0.18 times more return on investment than Oi SA. However, Exxon Mobil is 5.52 times less risky than Oi SA. It trades about 0.2 of its potential returns per unit of risk. Oi SA is currently generating about -0.01 per unit of risk. If you would invest 8,418 in Exxon Mobil on September 2, 2024 and sell it today you would earn a total of 456.00 from holding Exxon Mobil or generate 5.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil vs. Oi SA
Performance |
| Timeline |
| Exxon Mobil |
| Oi SA |
Exxon Mobil and Oi SA Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon Mobil and Oi SA
The main advantage of trading using opposite Exxon Mobil and Oi SA positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon Mobil position performs unexpectedly, Oi SA 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 Oi SA will offset losses from the drop in Oi SA's long position.The idea behind Exxon Mobil and Oi SA 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 the Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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