Correlation Between Exxon and Algoma Central
Can any of the company-specific risk be diversified away by investing in both Exxon and Algoma Central 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 Algoma Central into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXXON MOBIL CDR and Algoma Central, you can compare the effects of market volatilities on Exxon and Algoma Central 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 Algoma Central. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Algoma Central.
Diversification Opportunities for Exxon and Algoma Central
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Algoma is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Algoma Central in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Algoma Central 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 CDR are associated (or correlated) with Algoma Central. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Algoma Central has no effect on the direction of Exxon i.e., Exxon and Algoma Central go up and down completely randomly.
Pair Corralation between Exxon and Algoma Central
Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to under-perform the Algoma Central. In addition to that, Exxon is 1.38 times more volatile than Algoma Central. It trades about 0.0 of its total potential returns per unit of risk. Algoma Central is currently generating about 0.02 per unit of volatility. If you would invest 1,503 in Algoma Central on August 29, 2024 and sell it today you would earn a total of 4.00 from holding Algoma Central or generate 0.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EXXON MOBIL CDR vs. Algoma Central
Performance |
| Timeline |
| EXXON MOBIL CDR |
| Algoma Central |
Exxon and Algoma Central Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Algoma Central
The main advantage of trading using opposite Exxon and Algoma Central positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Algoma Central 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 Algoma Central will offset losses from the drop in Algoma Central's long position.The idea behind EXXON MOBIL CDR and Algoma Central 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.| Algoma Central vs. Ritchie Bros Auctioneers | Algoma Central vs. Winpak | Algoma Central vs. North West | Algoma Central vs. Altus Group Limited |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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