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 MSCI, 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
0.03 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Exxon and IShares is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and iShares Core MSCI in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core MSCI 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 MSCI 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 1.18 times less return on investment than IShares Core. In addition to that, Exxon is 1.55 times more volatile than iShares Core MSCI. It trades about 0.03 of its total potential returns per unit of risk. iShares Core MSCI is currently generating about 0.06 per unit of volatility. If you would invest 5,114 in iShares Core MSCI on September 5, 2024 and sell it today you would earn a total of 1,432 from holding iShares Core MSCI or generate 28.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. iShares Core MSCI
Performance |
| Timeline |
| Exxon Mobil Corp |
| iShares Core MSCI |
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.| Exxon vs. Shell PLC ADR | Exxon vs. TotalEnergies SE ADR | Exxon vs. Equinor ASA ADR | Exxon vs. Petrleo Brasileiro SA |
| IShares Core vs. iShares Core MSCI | IShares Core vs. iShares Core International | IShares Core vs. iShares Core 10 | IShares Core vs. iShares MSCI Emerging |
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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