Correlation Between Exxon and BZAM
Can any of the company-specific risk be diversified away by investing in both Exxon and BZAM 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 BZAM 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 BZAM, you can compare the effects of market volatilities on Exxon and BZAM 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 BZAM. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and BZAM.
Diversification Opportunities for Exxon and BZAM
Excellent diversification
The 3 months correlation between Exxon and BZAM is -0.58. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and BZAM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BZAM 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 BZAM. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BZAM has no effect on the direction of Exxon i.e., Exxon and BZAM go up and down completely randomly.
Pair Corralation between Exxon and BZAM
Considering the 90-day investment horizon Exxon is expected to generate 125.41 times less return on investment than BZAM. But when comparing it to its historical volatility, Exxon Mobil Corp is 76.11 times less risky than BZAM. It trades about 0.05 of its potential returns per unit of risk. BZAM is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 13.00 in BZAM on August 26, 2024 and sell it today you would lose (12.99) from holding BZAM or give up 99.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 99.7% |
| Values | Daily Returns |
Exxon Mobil Corp vs. BZAM
Performance |
| Timeline |
| Exxon Mobil Corp |
| BZAM |
Exxon and BZAM Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and BZAM
The main advantage of trading using opposite Exxon and BZAM positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, BZAM 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 BZAM will offset losses from the drop in BZAM's long position.| Exxon vs. Shell PLC ADR | Exxon vs. Suncor Energy | Exxon vs. Cenovus Energy | Exxon vs. Petrleo Brasileiro SA |
| BZAM vs. Udemy Inc | BZAM vs. Bright Scholar Education | BZAM vs. Evolution Mining | BZAM vs. WEBTOON Entertainment Common |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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