Correlation Between Exxon and Vanguard Quality
Can any of the company-specific risk be diversified away by investing in both Exxon and Vanguard Quality 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 Vanguard Quality 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 Vanguard Quality Factor, you can compare the effects of market volatilities on Exxon and Vanguard Quality 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 Vanguard Quality. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Vanguard Quality.
Diversification Opportunities for Exxon and Vanguard Quality
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Vanguard is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Vanguard Quality Factor in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Quality Factor 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 Vanguard Quality. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Quality Factor has no effect on the direction of Exxon i.e., Exxon and Vanguard Quality go up and down completely randomly.
Pair Corralation between Exxon and Vanguard Quality
Considering the 90-day investment horizon Exxon is expected to generate 26.39 times less return on investment than Vanguard Quality. In addition to that, Exxon is 1.14 times more volatile than Vanguard Quality Factor. It trades about 0.01 of its total potential returns per unit of risk. Vanguard Quality Factor is currently generating about 0.21 per unit of volatility. If you would invest 14,178 in Vanguard Quality Factor on August 29, 2024 and sell it today you would earn a total of 716.00 from holding Vanguard Quality Factor or generate 5.05% 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. Vanguard Quality Factor
Performance |
| Timeline |
| Exxon Mobil Corp |
| Vanguard Quality Factor |
Exxon and Vanguard Quality Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Vanguard Quality
The main advantage of trading using opposite Exxon and Vanguard Quality positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Vanguard Quality 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 Vanguard Quality will offset losses from the drop in Vanguard Quality's long position.The idea behind Exxon Mobil Corp and Vanguard Quality Factor 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.| Vanguard Quality vs. Vanguard Mid Cap Index | Vanguard Quality vs. iShares Core SP | Vanguard Quality vs. SPDR SP MIDCAP | Vanguard Quality vs. Vanguard SP Mid Cap |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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