Correlation Between Exxon and IShares Expanded
Can any of the company-specific risk be diversified away by investing in both Exxon and IShares Expanded 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 Expanded 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 Expanded Tech, you can compare the effects of market volatilities on Exxon and IShares Expanded 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 Expanded. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and IShares Expanded.
Diversification Opportunities for Exxon and IShares Expanded
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and IShares is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and iShares Expanded Tech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Expanded Tech 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 Expanded. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Expanded Tech has no effect on the direction of Exxon i.e., Exxon and IShares Expanded go up and down completely randomly.
Pair Corralation between Exxon and IShares Expanded
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.09 times more return on investment than IShares Expanded. However, Exxon is 1.09 times more volatile than iShares Expanded Tech. It trades about 0.13 of its potential returns per unit of risk. iShares Expanded Tech is currently generating about 0.12 per unit of risk. If you would invest 11,383 in Exxon Mobil Corp on August 26, 2024 and sell it today you would earn a total of 796.00 from holding Exxon Mobil Corp or generate 6.99% 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. iShares Expanded Tech
Performance |
| Timeline |
| Exxon Mobil Corp |
| iShares Expanded Tech |
Exxon and IShares Expanded Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and IShares Expanded
The main advantage of trading using opposite Exxon and IShares Expanded positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, IShares Expanded 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 Expanded will offset losses from the drop in IShares Expanded's long position.The idea behind Exxon Mobil Corp and iShares Expanded Tech 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 Expanded vs. iShares Global Tech | IShares Expanded vs. iShares Technology ETF | IShares Expanded vs. iShares Consumer Discretionary | IShares Expanded vs. iShares Expanded Tech Software |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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