Correlation Between NYSE Composite and Exxon
Can any of the company-specific risk be diversified away by investing in both NYSE Composite 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 NYSE Composite and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NYSE Composite and Exxon Mobil Corp, you can compare the effects of market volatilities on NYSE Composite 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 NYSE Composite with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of NYSE Composite and Exxon.
Diversification Opportunities for NYSE Composite and Exxon
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NYSE and Exxon is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NYSE Composite and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and NYSE Composite 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 NYSE Composite 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 Corp has no effect on the direction of NYSE Composite i.e., NYSE Composite and Exxon go up and down completely randomly.
Pair Corralation between NYSE Composite and Exxon
Assuming the 90 days trading horizon NYSE Composite is expected to generate 1.86 times less return on investment than Exxon. But when comparing it to its historical volatility, NYSE Composite is 1.45 times less risky than Exxon. It trades about 0.27 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 10,551 in Exxon Mobil Corp on October 20, 2024 and sell it today you would earn a total of 681.00 from holding Exxon Mobil Corp or generate 6.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NYSE Composite vs. Exxon Mobil Corp
Performance |
| Timeline |
NYSE Composite and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
NYSE Composite
Pair trading matchups for NYSE Composite
Exxon Mobil Corp
Pair trading matchups for Exxon
Pair Trading with NYSE Composite and Exxon
The main advantage of trading using opposite NYSE Composite and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NYSE Composite 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.| NYSE Composite vs. National Health Investors | NYSE Composite vs. Arbor Realty Trust | NYSE Composite vs. Canaf Investments | NYSE Composite vs. Freedom Holding Corp |
| Exxon vs. Petroleo Brasileiro Petrobras | Exxon vs. Equinor ASA ADR | Exxon vs. Eni SpA ADR | Exxon vs. Cenovus Energy |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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