Correlation Between Exxon and Coloplast A/S
Can any of the company-specific risk be diversified away by investing in both Exxon and Coloplast A/S 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 Coloplast A/S 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 Coloplast AS, you can compare the effects of market volatilities on Exxon and Coloplast A/S 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 Coloplast A/S. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Coloplast A/S.
Diversification Opportunities for Exxon and Coloplast A/S
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Coloplast is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Coloplast AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coloplast A/S 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 Coloplast A/S. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coloplast A/S has no effect on the direction of Exxon i.e., Exxon and Coloplast A/S go up and down completely randomly.
Pair Corralation between Exxon and Coloplast A/S
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.54 times more return on investment than Coloplast A/S. However, Exxon is 1.54 times more volatile than Coloplast AS. It trades about 0.06 of its potential returns per unit of risk. Coloplast AS is currently generating about -0.18 per unit of risk. If you would invest 10,614 in Exxon Mobil Corp on December 4, 2024 and sell it today you would earn a total of 162.00 from holding Exxon Mobil Corp or generate 1.53% 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. Coloplast AS
Performance |
| Timeline |
| Exxon Mobil Corp |
| Coloplast A/S |
Exxon and Coloplast A/S Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Coloplast A/S
The main advantage of trading using opposite Exxon and Coloplast A/S positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Coloplast A/S 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 Coloplast A/S will offset losses from the drop in Coloplast A/S'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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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