Correlation Between Exxon and City Developments
Can any of the company-specific risk be diversified away by investing in both Exxon and City Developments 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 City Developments 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 City Developments Limited, you can compare the effects of market volatilities on Exxon and City Developments 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 City Developments. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and City Developments.
Diversification Opportunities for Exxon and City Developments
-0.85 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Exxon and City is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and City Developments Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on City Developments 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 City Developments. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of City Developments has no effect on the direction of Exxon i.e., Exxon and City Developments go up and down completely randomly.
Pair Corralation between Exxon and City Developments
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.61 times more return on investment than City Developments. However, Exxon Mobil Corp is 1.65 times less risky than City Developments. It trades about 0.04 of its potential returns per unit of risk. City Developments Limited is currently generating about -0.11 per unit of risk. If you would invest 10,115 in Exxon Mobil Corp on September 4, 2024 and sell it today you would earn a total of 1,670 from holding Exxon Mobil Corp or generate 16.51% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 32.17% |
| Values | Daily Returns |
Exxon Mobil Corp vs. City Developments Limited
Performance |
| Timeline |
| Exxon Mobil Corp |
| City Developments |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Exxon and City Developments Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and City Developments
The main advantage of trading using opposite Exxon and City Developments positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, City Developments 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 City Developments will offset losses from the drop in City Developments' long position.The idea behind Exxon Mobil Corp and City Developments Limited 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.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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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