Correlation Between Exxon and SPDR SP
Can any of the company-specific risk be diversified away by investing in both Exxon and SPDR 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 SPDR 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 SPDR SP 1500, you can compare the effects of market volatilities on Exxon and SPDR 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 SPDR SP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and SPDR SP.
Diversification Opportunities for Exxon and SPDR SP
Poor diversification
The 3 months correlation between Exxon and SPDR is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and SPDR SP 1500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR SP 1500 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 SPDR SP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR SP 1500 has no effect on the direction of Exxon i.e., Exxon and SPDR SP go up and down completely randomly.
Pair Corralation between Exxon and SPDR SP
Considering the 90-day investment horizon Exxon is expected to generate 3.25 times less return on investment than SPDR SP. In addition to that, Exxon is 1.4 times more volatile than SPDR SP 1500. It trades about 0.08 of its total potential returns per unit of risk. SPDR SP 1500 is currently generating about 0.35 per unit of volatility. If you would invest 18,315 in SPDR SP 1500 on September 1, 2024 and sell it today you would earn a total of 1,254 from holding SPDR SP 1500 or generate 6.85% 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. SPDR SP 1500
Performance |
| Timeline |
| Exxon Mobil Corp |
| SPDR SP 1500 |
Exxon and SPDR SP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and SPDR SP
The main advantage of trading using opposite Exxon and SPDR SP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, SPDR 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 SPDR SP will offset losses from the drop in SPDR SP's long position.The idea behind Exxon Mobil Corp and SPDR SP 1500 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.| SPDR SP vs. iShares Core SP | SPDR SP vs. iShares Core MSCI | SPDR SP vs. iShares Broad USD | SPDR SP vs. iShares Core SP |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| ETFs Find actively traded Exchange Traded Funds (ETF) from around the world | |
| Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges |