Correlation Between Exxon and American Century
Can any of the company-specific risk be diversified away by investing in both Exxon and American Century 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 American Century 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 American Century ETF, you can compare the effects of market volatilities on Exxon and American Century 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 American Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and American Century.
Diversification Opportunities for Exxon and American Century
0.54 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Exxon and American is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and American Century ETF in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Century ETF 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 American Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Century ETF has no effect on the direction of Exxon i.e., Exxon and American Century go up and down completely randomly.
Pair Corralation between Exxon and American Century
Considering the 90-day investment horizon Exxon is expected to generate 2.47 times less return on investment than American Century. In addition to that, Exxon is 1.17 times more volatile than American Century ETF. It trades about 0.04 of its total potential returns per unit of risk. American Century ETF is currently generating about 0.11 per unit of volatility. If you would invest 5,396 in American Century ETF on August 27, 2024 and sell it today you would earn a total of 4,886 from holding American Century ETF or generate 90.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. American Century ETF
Performance |
| Timeline |
| Exxon Mobil Corp |
| American Century ETF |
Exxon and American Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and American Century
The main advantage of trading using opposite Exxon and American Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, American Century 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 American Century will offset losses from the drop in American Century's long position.The idea behind Exxon Mobil Corp and American Century ETF 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.| American Century vs. Invesco DWA Technology | American Century vs. CNX Resources Corp | American Century vs. Natural Resource Partners | American Century vs. Albertsons Companies |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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