Correlation Between Exxon and Charlottes Web
Can any of the company-specific risk be diversified away by investing in both Exxon and Charlottes Web 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 Charlottes Web 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 Charlottes Web Holdings, you can compare the effects of market volatilities on Exxon and Charlottes Web 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 Charlottes Web. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Charlottes Web.
Diversification Opportunities for Exxon and Charlottes Web
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Exxon and Charlottes is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Charlottes Web Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Charlottes Web Holdings 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 Charlottes Web. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Charlottes Web Holdings has no effect on the direction of Exxon i.e., Exxon and Charlottes Web go up and down completely randomly.
Pair Corralation between Exxon and Charlottes Web
Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 0.23 times more return on investment than Charlottes Web. However, EXXON MOBIL CDR is 4.28 times less risky than Charlottes Web. It trades about -0.04 of its potential returns per unit of risk. Charlottes Web Holdings is currently generating about -0.03 per unit of risk. If you would invest 2,138 in EXXON MOBIL CDR on November 1, 2024 and sell it today you would lose (94.00) from holding EXXON MOBIL CDR or give up 4.4% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
EXXON MOBIL CDR vs. Charlottes Web Holdings
Performance |
| Timeline |
| EXXON MOBIL CDR |
| Charlottes Web Holdings |
Exxon and Charlottes Web Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Charlottes Web
The main advantage of trading using opposite Exxon and Charlottes Web positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Charlottes Web 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 Charlottes Web will offset losses from the drop in Charlottes Web's long position.| Exxon vs. Gfl Environmental Holdings | Exxon vs. Maple Leaf Foods | Exxon vs. Postmedia Network Canada | Exxon vs. Overactive Media Corp |
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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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