Correlation Between Exxon and Fidelity Small
Can any of the company-specific risk be diversified away by investing in both Exxon and Fidelity Small 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 Fidelity Small 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 Fidelity Small Mid Factor, you can compare the effects of market volatilities on Exxon and Fidelity Small 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 Fidelity Small. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Fidelity Small.
Diversification Opportunities for Exxon and Fidelity Small
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Fidelity is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Fidelity Small Mid Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity Small Mid 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 Fidelity Small. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity Small Mid has no effect on the direction of Exxon i.e., Exxon and Fidelity Small go up and down completely randomly.
Pair Corralation between Exxon and Fidelity Small
Considering the 90-day investment horizon Exxon is expected to generate 2.91 times less return on investment than Fidelity Small. In addition to that, Exxon is 1.12 times more volatile than Fidelity Small Mid Factor. It trades about 0.06 of its total potential returns per unit of risk. Fidelity Small Mid Factor is currently generating about 0.18 per unit of volatility. If you would invest 4,125 in Fidelity Small Mid Factor on August 28, 2024 and sell it today you would earn a total of 360.00 from holding Fidelity Small Mid Factor or generate 8.73% 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. Fidelity Small Mid Factor
Performance |
| Timeline |
| Exxon Mobil Corp |
| Fidelity Small Mid |
Exxon and Fidelity Small Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Fidelity Small
The main advantage of trading using opposite Exxon and Fidelity Small positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Fidelity Small 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 Fidelity Small will offset losses from the drop in Fidelity Small's long position.The idea behind Exxon Mobil Corp and Fidelity Small Mid Factor 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.| Fidelity Small vs. Fidelity Emerging Markets | Fidelity Small vs. Fidelity International Multifactor | Fidelity Small vs. Fidelity Quality Factor | Fidelity Small vs. Fidelity Low Volatility |
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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