Correlation Between Exxon and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Exxon and Pembina Pipeline 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 Pembina Pipeline 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 Pembina Pipeline Corp, you can compare the effects of market volatilities on Exxon and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Pembina Pipeline.
Diversification Opportunities for Exxon and Pembina Pipeline
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Pembina is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Exxon i.e., Exxon and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Exxon and Pembina Pipeline
Assuming the 90 days trading horizon EXXON MOBIL CDR is expected to generate 1.0 times more return on investment than Pembina Pipeline. However, Exxon is 1.0 times more volatile than Pembina Pipeline Corp. It trades about 0.06 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.02 per unit of risk. If you would invest 2,213 in EXXON MOBIL CDR on August 28, 2024 and sell it today you would earn a total of 32.00 from holding EXXON MOBIL CDR or generate 1.45% 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. Pembina Pipeline Corp
Performance |
| Timeline |
| EXXON MOBIL CDR |
| Pembina Pipeline Corp |
Exxon and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Pembina Pipeline
The main advantage of trading using opposite Exxon and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline's long position.The idea behind EXXON MOBIL CDR and Pembina Pipeline Corp 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.| Pembina Pipeline vs. Definity Financial Corp | Pembina Pipeline vs. Canadian Imperial Bank | Pembina Pipeline vs. Financial 15 Split | Pembina Pipeline vs. Royal Bank of |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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