Correlation Between Exxon and Carsales
Can any of the company-specific risk be diversified away by investing in both Exxon and Carsales 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 Carsales 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 CarsalesCom Ltd ADR, you can compare the effects of market volatilities on Exxon and Carsales 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 Carsales. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Carsales.
Diversification Opportunities for Exxon and Carsales
Very good diversification
The 3 months correlation between Exxon and Carsales is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and CarsalesCom Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CarsalesCom ADR 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 Carsales. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CarsalesCom ADR has no effect on the direction of Exxon i.e., Exxon and Carsales go up and down completely randomly.
Pair Corralation between Exxon and Carsales
Considering the 90-day investment horizon Exxon is expected to generate 2.97 times less return on investment than Carsales. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.63 times less risky than Carsales. It trades about 0.04 of its potential returns per unit of risk. CarsalesCom Ltd ADR is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest 2,906 in CarsalesCom Ltd ADR on August 27, 2024 and sell it today you would earn a total of 2,457 from holding CarsalesCom Ltd ADR or generate 84.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 88.91% |
| Values | Daily Returns |
Exxon Mobil Corp vs. CarsalesCom Ltd ADR
Performance |
| Timeline |
| Exxon Mobil Corp |
| CarsalesCom ADR |
Exxon and Carsales Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Carsales
The main advantage of trading using opposite Exxon and Carsales positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Carsales 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 Carsales will offset losses from the drop in Carsales' long position.The idea behind Exxon Mobil Corp and CarsalesCom Ltd ADR 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.| Carsales vs. Quizam Media | Carsales vs. DGTL Holdings | Carsales vs. Tinybeans Group Limited | Carsales vs. Sabio Holdings |
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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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