Correlation Between Exxon and VMG Consumer
Can any of the company-specific risk be diversified away by investing in both Exxon and VMG Consumer 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 VMG Consumer 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 VMG Consumer Acquisition, you can compare the effects of market volatilities on Exxon and VMG Consumer 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 VMG Consumer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and VMG Consumer.
Diversification Opportunities for Exxon and VMG Consumer
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and VMG is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and VMG Consumer Acquisition in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VMG Consumer Acquisition 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 VMG Consumer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VMG Consumer Acquisition has no effect on the direction of Exxon i.e., Exxon and VMG Consumer go up and down completely randomly.
Pair Corralation between Exxon and VMG Consumer
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 2.79 times more return on investment than VMG Consumer. However, Exxon is 2.79 times more volatile than VMG Consumer Acquisition. It trades about 0.04 of its potential returns per unit of risk. VMG Consumer Acquisition is currently generating about 0.05 per unit of risk. If you would invest 9,991 in Exxon Mobil Corp on August 26, 2024 and sell it today you would earn a total of 2,188 from holding Exxon Mobil Corp or generate 21.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 23.74% |
| Values | Daily Returns |
Exxon Mobil Corp vs. VMG Consumer Acquisition
Performance |
| Timeline |
| Exxon Mobil Corp |
| VMG Consumer Acquisition |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Exxon and VMG Consumer Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and VMG Consumer
The main advantage of trading using opposite Exxon and VMG Consumer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, VMG Consumer 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 VMG Consumer will offset losses from the drop in VMG Consumer's long position.| Exxon vs. Shell PLC ADR | Exxon vs. Suncor Energy | Exxon vs. Cenovus Energy | Exxon vs. Petrleo Brasileiro SA |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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