Correlation Between Exxon and MEI Pharma
Can any of the company-specific risk be diversified away by investing in both Exxon and MEI Pharma 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 MEI Pharma 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 MEI Pharma, you can compare the effects of market volatilities on Exxon and MEI Pharma 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 MEI Pharma. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and MEI Pharma.
Diversification Opportunities for Exxon and MEI Pharma
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and MEI is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and MEI Pharma in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MEI Pharma 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 MEI Pharma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MEI Pharma has no effect on the direction of Exxon i.e., Exxon and MEI Pharma go up and down completely randomly.
Pair Corralation between Exxon and MEI Pharma
Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the MEI Pharma. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.53 times less risky than MEI Pharma. The stock trades about -0.01 of its potential returns per unit of risk. The MEI Pharma is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 255.00 in MEI Pharma on November 3, 2024 and sell it today you would earn a total of 30.00 from holding MEI Pharma or generate 11.76% 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. MEI Pharma
Performance |
| Timeline |
| Exxon Mobil Corp |
| MEI Pharma |
Exxon and MEI Pharma Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and MEI Pharma
The main advantage of trading using opposite Exxon and MEI Pharma positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, MEI Pharma 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 MEI Pharma will offset losses from the drop in MEI Pharma's long position.The idea behind Exxon Mobil Corp and MEI Pharma 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.| MEI Pharma vs. Kezar Life Sciences | MEI Pharma vs. Vincerx Pharma | MEI Pharma vs. Avenue Therapeutics | MEI Pharma vs. Assembly Biosciences |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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