Correlation Between Exxon and Lotus Pharmaceuticals

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Can any of the company-specific risk be diversified away by investing in both Exxon and Lotus Pharmaceuticals 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 Lotus Pharmaceuticals 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 Lotus Pharmaceuticals, you can compare the effects of market volatilities on Exxon and Lotus Pharmaceuticals 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 Lotus Pharmaceuticals. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Lotus Pharmaceuticals.

Diversification Opportunities for Exxon and Lotus Pharmaceuticals

-0.27
  Correlation Coefficient

Very good diversification

The 3 months correlation between Exxon and Lotus is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Lotus Pharmaceuticals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lotus Pharmaceuticals 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 Lotus Pharmaceuticals. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lotus Pharmaceuticals has no effect on the direction of Exxon i.e., Exxon and Lotus Pharmaceuticals go up and down completely randomly.

Pair Corralation between Exxon and Lotus Pharmaceuticals

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.07 times more return on investment than Lotus Pharmaceuticals. However, Exxon Mobil Corp is 14.18 times less risky than Lotus Pharmaceuticals. It trades about 0.05 of its potential returns per unit of risk. Lotus Pharmaceuticals is currently generating about -0.17 per unit of risk. If you would invest  11,632  in Exxon Mobil Corp on August 30, 2024 and sell it today you would earn a total of  134.00  from holding Exxon Mobil Corp or generate 1.15% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Lotus Pharmaceuticals

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Lotus Pharmaceuticals 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Lotus Pharmaceuticals are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively conflicting basic indicators, Lotus Pharmaceuticals unveiled solid returns over the last few months and may actually be approaching a breakup point.

Exxon and Lotus Pharmaceuticals Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Lotus Pharmaceuticals

The main advantage of trading using opposite Exxon and Lotus Pharmaceuticals positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Lotus Pharmaceuticals 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 Lotus Pharmaceuticals will offset losses from the drop in Lotus Pharmaceuticals' long position.
The idea behind Exxon Mobil Corp and Lotus Pharmaceuticals 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.
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.

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