Correlation Between Exxon and IShares Core
Can any of the company-specific risk be diversified away by investing in both Exxon and IShares Core 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 Core 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 Core SP, you can compare the effects of market volatilities on Exxon and IShares Core 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 Core. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and IShares Core.
Diversification Opportunities for Exxon and IShares Core
0.64 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and IShares is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP 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 Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of Exxon i.e., Exxon and IShares Core go up and down completely randomly.
Pair Corralation between Exxon and IShares Core
Considering the 90-day investment horizon Exxon is expected to generate 5.49 times less return on investment than IShares Core. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.03 times less risky than IShares Core. It trades about 0.05 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 6,281 in iShares Core SP on August 30, 2024 and sell it today you would earn a total of 451.00 from holding iShares Core SP or generate 7.18% 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 Core SP
Performance |
| Timeline |
| Exxon Mobil Corp |
| iShares Core SP |
Exxon and IShares Core Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and IShares Core
The main advantage of trading using opposite Exxon and IShares Core positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, IShares Core 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 Core will offset losses from the drop in IShares Core's long position.The idea behind Exxon Mobil Corp and iShares Core SP 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 Core vs. JPMorgan Fundamental Data | IShares Core vs. Vanguard Mid Cap Index | IShares Core vs. SPDR SP 400 | IShares Core vs. SPDR SP 400 |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Other Complementary Tools
| Global Correlations Find global opportunities by holding instruments from different markets | |
| Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk |