Correlation Between Exxon and Regents Park
Can any of the company-specific risk be diversified away by investing in both Exxon and Regents Park 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 Regents Park 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 Regents Park Hedged, you can compare the effects of market volatilities on Exxon and Regents Park 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 Regents Park. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Regents Park.
Diversification Opportunities for Exxon and Regents Park
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Regents is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Regents Park Hedged in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regents Park Hedged 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 Regents Park. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regents Park Hedged has no effect on the direction of Exxon i.e., Exxon and Regents Park go up and down completely randomly.
Pair Corralation between Exxon and Regents Park
Considering the 90-day investment horizon Exxon is expected to generate 2.09 times less return on investment than Regents Park. In addition to that, Exxon is 2.14 times more volatile than Regents Park Hedged. It trades about 0.08 of its total potential returns per unit of risk. Regents Park Hedged is currently generating about 0.35 per unit of volatility. If you would invest 1,030 in Regents Park Hedged on September 1, 2024 and sell it today you would earn a total of 45.00 from holding Regents Park Hedged or generate 4.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Regents Park Hedged
Performance |
| Timeline |
| Exxon Mobil Corp |
| Regents Park Hedged |
Exxon and Regents Park Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Regents Park
The main advantage of trading using opposite Exxon and Regents Park positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Regents Park 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 Regents Park will offset losses from the drop in Regents Park's long position.The idea behind Exxon Mobil Corp and Regents Park Hedged 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.| Regents Park vs. iShares ESG Aware | Regents Park vs. iShares ESG Aware | Regents Park vs. iShares ESG Aware | Regents Park vs. iShares ESG Advanced |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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