Correlation Between Exxon and IShares MSCI
Can any of the company-specific risk be diversified away by investing in both Exxon and IShares MSCI 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 IShares MSCI 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 iShares MSCI BIC, you can compare the effects of market volatilities on Exxon and IShares MSCI 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 IShares MSCI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and IShares MSCI.
Diversification Opportunities for Exxon and IShares MSCI
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and IShares is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and iShares MSCI BIC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares MSCI BIC 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 IShares MSCI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares MSCI BIC has no effect on the direction of Exxon i.e., Exxon and IShares MSCI go up and down completely randomly.
Pair Corralation between Exxon and IShares MSCI
Considering the 90-day investment horizon Exxon is expected to generate 1.09 times less return on investment than IShares MSCI. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.23 times less risky than IShares MSCI. It trades about 0.05 of its potential returns per unit of risk. iShares MSCI BIC is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,614 in iShares MSCI BIC on August 28, 2024 and sell it today you would earn a total of 141.00 from holding iShares MSCI BIC or generate 3.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. iShares MSCI BIC
Performance |
| Timeline |
| Exxon Mobil Corp |
| iShares MSCI BIC |
Exxon and IShares MSCI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and IShares MSCI
The main advantage of trading using opposite Exxon and IShares MSCI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, IShares MSCI 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 IShares MSCI will offset losses from the drop in IShares MSCI's long position.The idea behind Exxon Mobil Corp and iShares MSCI BIC 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.| IShares MSCI vs. Invesco PureBeta MSCI | IShares MSCI vs. Aquagold International | IShares MSCI vs. Morningstar Unconstrained Allocation | IShares MSCI vs. High Yield Municipal Fund |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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