Correlation Between Exxon and Future Fund
Can any of the company-specific risk be diversified away by investing in both Exxon and Future Fund 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 Future Fund 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 The Future Fund, you can compare the effects of market volatilities on Exxon and Future Fund 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 Future Fund. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Future Fund.
Diversification Opportunities for Exxon and Future Fund
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Future is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and The Future Fund in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Future Fund 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 Future Fund. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Future Fund has no effect on the direction of Exxon i.e., Exxon and Future Fund go up and down completely randomly.
Pair Corralation between Exxon and Future Fund
Considering the 90-day investment horizon Exxon is expected to generate 3.65 times less return on investment than Future Fund. In addition to that, Exxon is 1.03 times more volatile than The Future Fund. It trades about 0.07 of its total potential returns per unit of risk. The Future Fund is currently generating about 0.28 per unit of volatility. If you would invest 2,448 in The Future Fund on August 27, 2024 and sell it today you would earn a total of 168.00 from holding The Future Fund or generate 6.86% 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. The Future Fund
Performance |
| Timeline |
| Exxon Mobil Corp |
| Future Fund |
Exxon and Future Fund Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Future Fund
The main advantage of trading using opposite Exxon and Future Fund positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Future Fund 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 Future Fund will offset losses from the drop in Future Fund's long position.The idea behind Exxon Mobil Corp and The Future Fund 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.| Future Fund vs. Invesco Dynamic Large | Future Fund vs. Perella Weinberg Partners | Future Fund vs. HUMANA INC | Future Fund vs. Aquagold International |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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