Correlation Between Exxon and IShares Trust
Can any of the company-specific risk be diversified away by investing in both Exxon and IShares Trust 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 IShares Trust 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 iShares Trust, you can compare the effects of market volatilities on Exxon and IShares Trust 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 IShares Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and IShares Trust.
Diversification Opportunities for Exxon and IShares Trust
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and IShares is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and iShares Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Trust 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 IShares Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Trust has no effect on the direction of Exxon i.e., Exxon and IShares Trust go up and down completely randomly.
Pair Corralation between Exxon and IShares Trust
Considering the 90-day investment horizon Exxon is expected to generate 4.32 times less return on investment than IShares Trust. In addition to that, Exxon is 1.63 times more volatile than iShares Trust. It trades about 0.02 of its total potential returns per unit of risk. iShares Trust is currently generating about 0.13 per unit of volatility. If you would invest 2,571 in iShares Trust on September 3, 2024 and sell it today you would earn a total of 39.00 from holding iShares Trust or generate 1.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. iShares Trust
Performance |
| Timeline |
| Exxon Mobil Corp |
| iShares Trust |
Exxon and IShares Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and IShares Trust
The main advantage of trading using opposite Exxon and IShares Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, IShares Trust 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 IShares Trust will offset losses from the drop in IShares Trust's long position.The idea behind Exxon Mobil Corp and iShares Trust 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.| IShares Trust vs. VanEck Vectors Moodys | IShares Trust vs. Xtrackers California Municipal | IShares Trust vs. Vanguard ESG Corporate | IShares Trust vs. Vanguard Intermediate Term Corporate |
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 Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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