Correlation Between Exxon and NFI
Can any of the company-specific risk be diversified away by investing in both Exxon and NFI 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 NFI 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 NFI Group, you can compare the effects of market volatilities on Exxon and NFI 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 NFI. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and NFI.
Diversification Opportunities for Exxon and NFI
Excellent diversification
The 3 months correlation between Exxon and NFI is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and NFI Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NFI Group 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 NFI. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NFI Group has no effect on the direction of Exxon i.e., Exxon and NFI go up and down completely randomly.
Pair Corralation between Exxon and NFI
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.61 times more return on investment than NFI. However, Exxon Mobil Corp is 1.64 times less risky than NFI. It trades about 0.07 of its potential returns per unit of risk. NFI Group is currently generating about -0.26 per unit of risk. If you would invest 11,793 in Exxon Mobil Corp on August 28, 2024 and sell it today you would earn a total of 204.00 from holding Exxon Mobil Corp or generate 1.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. NFI Group
Performance |
| Timeline |
| Exxon Mobil Corp |
| NFI Group |
Exxon and NFI Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and NFI
The main advantage of trading using opposite Exxon and NFI positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, NFI 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 NFI will offset losses from the drop in NFI's long position.The idea behind Exxon Mobil Corp and NFI Group 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.| NFI vs. Zapp Electric Vehicles | NFI vs. Guangzhou Automobile Group | NFI vs. Exor NV | NFI vs. Aston Martin Lagonda |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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