Correlation Between Exxon and Invesco SP
Can any of the company-specific risk be diversified away by investing in both Exxon and Invesco SP 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 Invesco SP 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 Invesco SP SmallCap, you can compare the effects of market volatilities on Exxon and Invesco SP 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 Invesco SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Invesco SP.
Diversification Opportunities for Exxon and Invesco SP
0.63 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Invesco is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Invesco SP SmallCap in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invesco SP SmallCap 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 Invesco SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invesco SP SmallCap has no effect on the direction of Exxon i.e., Exxon and Invesco SP go up and down completely randomly.
Pair Corralation between Exxon and Invesco SP
Considering the 90-day investment horizon Exxon is expected to generate 40.53 times less return on investment than Invesco SP. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.42 times less risky than Invesco SP. It trades about 0.01 of its potential returns per unit of risk. Invesco SP SmallCap is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,534 in Invesco SP SmallCap on August 28, 2024 and sell it today you would earn a total of 350.00 from holding Invesco SP SmallCap or generate 7.72% 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. Invesco SP SmallCap
Performance |
| Timeline |
| Exxon Mobil Corp |
| Invesco SP SmallCap |
Exxon and Invesco SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Invesco SP
The main advantage of trading using opposite Exxon and Invesco SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Invesco SP 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 Invesco SP will offset losses from the drop in Invesco SP's long position.The idea behind Exxon Mobil Corp and Invesco SP SmallCap 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.| Invesco SP vs. Invesco SP MidCap | Invesco SP vs. Invesco SP 500 | Invesco SP vs. WisdomTree SmallCap Earnings | Invesco SP vs. Invesco SP SmallCap |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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