Correlation Between Exxon and Lotus Pharmaceuticals
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 Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. Lotus Pharmaceuticals
Performance |
Timeline |
Exxon Mobil Corp |
Lotus Pharmaceuticals |
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.Exxon vs. BP PLC ADR | Exxon vs. Shell PLC ADR | Exxon vs. Petroleo Brasileiro Petrobras | Exxon vs. Suncor Energy |
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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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