Correlation Between Exxon and Vanguard Health
Can any of the company-specific risk be diversified away by investing in both Exxon and Vanguard Health 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 Health 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 Health Care, you can compare the effects of market volatilities on Exxon and Vanguard Health 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 Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Vanguard Health.
Diversification Opportunities for Exxon and Vanguard Health
-0.46 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and Vanguard is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Vanguard Health Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vanguard Health Care 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 Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vanguard Health Care has no effect on the direction of Exxon i.e., Exxon and Vanguard Health go up and down completely randomly.
Pair Corralation between Exxon and Vanguard Health
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.72 times more return on investment than Vanguard Health. However, Exxon is 1.72 times more volatile than Vanguard Health Care. It trades about 0.07 of its potential returns per unit of risk. Vanguard Health Care is currently generating about 0.07 per unit of risk. If you would invest 9,935 in Exxon Mobil Corp on August 26, 2024 and sell it today you would earn a total of 2,244 from holding Exxon Mobil Corp or generate 22.59% 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. Vanguard Health Care
Performance |
| Timeline |
| Exxon Mobil Corp |
| Vanguard Health Care |
Exxon and Vanguard Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Vanguard Health
The main advantage of trading using opposite Exxon and Vanguard Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Vanguard Health 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 Health will offset losses from the drop in Vanguard Health's long position.The idea behind Exxon Mobil Corp and Vanguard Health Care 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 Health vs. Vanguard Consumer Staples | Vanguard Health vs. Vanguard Financials Index | Vanguard Health vs. Vanguard Information Technology | Vanguard Health vs. Vanguard Consumer Discretionary |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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