Correlation Between Exxon and Tradr 2X

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Can any of the company-specific risk be diversified away by investing in both Exxon and Tradr 2X 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 Tradr 2X 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 Tradr 2X Long, you can compare the effects of market volatilities on Exxon and Tradr 2X 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 Tradr 2X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Tradr 2X.

Diversification Opportunities for Exxon and Tradr 2X

0.61
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exxon and Tradr is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Tradr 2X Long in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tradr 2X Long 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 Tradr 2X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tradr 2X Long has no effect on the direction of Exxon i.e., Exxon and Tradr 2X go up and down completely randomly.

Pair Corralation between Exxon and Tradr 2X

Considering the 90-day investment horizon Exxon is expected to generate 6.0 times less return on investment than Tradr 2X. In addition to that, Exxon is 1.01 times more volatile than Tradr 2X Long. It trades about 0.03 of its total potential returns per unit of risk. Tradr 2X Long is currently generating about 0.18 per unit of volatility. If you would invest  2,395  in Tradr 2X Long on September 3, 2024 and sell it today you would earn a total of  410.00  from holding Tradr 2X Long or generate 17.12% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy12.93%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Tradr 2X Long

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

3 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.
Tradr 2X Long 

Risk-Adjusted Performance

14 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Tradr 2X Long are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Tradr 2X displayed solid returns over the last few months and may actually be approaching a breakup point.

Exxon and Tradr 2X Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Tradr 2X

The main advantage of trading using opposite Exxon and Tradr 2X positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Tradr 2X 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 Tradr 2X will offset losses from the drop in Tradr 2X's long position.
The idea behind Exxon Mobil Corp and Tradr 2X Long 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.
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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 Anywhere module to track or share privately all of your investments from the convenience of any device.

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