Correlation Between Exxon and First Trust
Can any of the company-specific risk be diversified away by investing in both Exxon and First 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 First 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 First Trust Exchange Traded, you can compare the effects of market volatilities on Exxon and First 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 First Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and First Trust.
Diversification Opportunities for Exxon and First Trust
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and First is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and First Trust Exchange Traded in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Trust Exchange 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 First Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Trust Exchange has no effect on the direction of Exxon i.e., Exxon and First Trust go up and down completely randomly.
Pair Corralation between Exxon and First Trust
Considering the 90-day investment horizon Exxon is expected to generate 1.78 times less return on investment than First Trust. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.11 times less risky than First Trust. It trades about 0.07 of its potential returns per unit of risk. First Trust Exchange Traded is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,529 in First Trust Exchange Traded on August 31, 2024 and sell it today you would earn a total of 80.70 from holding First Trust Exchange Traded or generate 3.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Exxon Mobil Corp vs. First Trust Exchange Traded
Performance |
| Timeline |
| Exxon Mobil Corp |
| First Trust Exchange |
Exxon and First Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and First Trust
The main advantage of trading using opposite Exxon and First Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, First 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 First Trust will offset losses from the drop in First Trust's long position.| Exxon vs. RLJ Lodging Trust | Exxon vs. Aquagold International | Exxon vs. Stepstone Group | Exxon vs. Morningstar Unconstrained Allocation |
| First Trust vs. First Trust Expanded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust Exchange Traded | First Trust vs. First Trust 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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