Correlation Between First National and Exxon
Can any of the company-specific risk be diversified away by investing in both First National 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 First National and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Financial and EXXON MOBIL CDR, you can compare the effects of market volatilities on First National 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 First National with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and Exxon.
Diversification Opportunities for First National and Exxon
0.11 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Exxon is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding First National Financial and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR and First National 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 First National Financial 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 CDR has no effect on the direction of First National i.e., First National and Exxon go up and down completely randomly.
Pair Corralation between First National and Exxon
Assuming the 90 days trading horizon First National Financial is expected to generate 0.74 times more return on investment than Exxon. However, First National Financial is 1.35 times less risky than Exxon. It trades about 0.11 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about 0.08 per unit of risk. If you would invest 1,450 in First National Financial on September 1, 2024 and sell it today you would earn a total of 30.00 from holding First National Financial or generate 2.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Financial vs. EXXON MOBIL CDR
Performance |
| Timeline |
| First National Financial |
| EXXON MOBIL CDR |
First National and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and Exxon
The main advantage of trading using opposite First National and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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.| First National vs. Champion Gaming Group | First National vs. Endeavour Silver Corp | First National vs. Nicola Mining | First National vs. Perseus Mining |
| Exxon vs. Orbit Garant Drilling | Exxon vs. US Financial 15 | Exxon vs. Financial 15 Split | Exxon vs. First National Financial |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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| Portfolio Volatility Check portfolio volatility and analyze historical return density to properly model market risk |