Correlation Between Exxon and Auburn Bancorp
Can any of the company-specific risk be diversified away by investing in both Exxon and Auburn Bancorp 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 Auburn Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Auburn Bancorp, you can compare the effects of market volatilities on Exxon and Auburn Bancorp 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 Auburn Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Auburn Bancorp.
Diversification Opportunities for Exxon and Auburn Bancorp
-0.19 | Correlation Coefficient |
Good diversification
The 3 months correlation between Exxon and Auburn is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Auburn Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Auburn Bancorp 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 Corp are associated (or correlated) with Auburn Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Auburn Bancorp has no effect on the direction of Exxon i.e., Exxon and Auburn Bancorp go up and down completely randomly.
Pair Corralation between Exxon and Auburn Bancorp
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.8 times more return on investment than Auburn Bancorp. However, Exxon Mobil Corp is 1.25 times less risky than Auburn Bancorp. It trades about 0.02 of its potential returns per unit of risk. Auburn Bancorp is currently generating about -0.03 per unit of risk. If you would invest 9,435 in Exxon Mobil Corp on December 5, 2024 and sell it today you would earn a total of 935.00 from holding Exxon Mobil Corp or generate 9.91% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.8% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Auburn Bancorp
Performance |
| Timeline |
| Exxon Mobil Corp |
| Auburn Bancorp |
Exxon and Auburn Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Auburn Bancorp
The main advantage of trading using opposite Exxon and Auburn Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Auburn Bancorp 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 Auburn Bancorp will offset losses from the drop in Auburn Bancorp's long position.| Exxon vs. Shell PLC ADR | ||
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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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