Correlation Between Exxon and Cazoo
Can any of the company-specific risk be diversified away by investing in both Exxon and Cazoo 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 Cazoo 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 Cazoo Group, you can compare the effects of market volatilities on Exxon and Cazoo 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 Cazoo. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Cazoo.
Diversification Opportunities for Exxon and Cazoo
Pay attention - limited upside
The 3 months correlation between Exxon and Cazoo is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Cazoo Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cazoo Group 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 Cazoo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cazoo Group has no effect on the direction of Exxon i.e., Exxon and Cazoo go up and down completely randomly.
Pair Corralation between Exxon and Cazoo
Considering the 90-day investment horizon Exxon is expected to generate 130.38 times less return on investment than Cazoo. But when comparing it to its historical volatility, Exxon Mobil Corp is 59.13 times less risky than Cazoo. It trades about 0.03 of its potential returns per unit of risk. Cazoo Group is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 14,900 in Cazoo Group on August 31, 2024 and sell it today you would lose (14,899) from holding Cazoo Group or give up 99.99% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 75.67% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Cazoo Group
Performance |
| Timeline |
| Exxon Mobil Corp |
| Cazoo Group |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Exxon and Cazoo Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Cazoo
The main advantage of trading using opposite Exxon and Cazoo positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Cazoo 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 Cazoo will offset losses from the drop in Cazoo's long position.| Exxon vs. RLJ Lodging Trust | Exxon vs. Aquagold International | Exxon vs. Stepstone Group | Exxon vs. Morningstar Unconstrained Allocation |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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