Correlation Between Exxon and Western Copper
Can any of the company-specific risk be diversified away by investing in both Exxon and Western Copper 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 Western Copper 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 Western Copper and, you can compare the effects of market volatilities on Exxon and Western Copper 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 Western Copper. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Western Copper.
Diversification Opportunities for Exxon and Western Copper
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Exxon and Western is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Western Copper and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Copper 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 Western Copper. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Copper has no effect on the direction of Exxon i.e., Exxon and Western Copper go up and down completely randomly.
Pair Corralation between Exxon and Western Copper
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.41 times more return on investment than Western Copper. However, Exxon Mobil Corp is 2.44 times less risky than Western Copper. It trades about 0.06 of its potential returns per unit of risk. Western Copper and is currently generating about -0.02 per unit of risk. If you would invest 10,310 in Exxon Mobil Corp on September 1, 2024 and sell it today you would earn a total of 1,486 from holding Exxon Mobil Corp or generate 14.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Western Copper and
Performance |
| Timeline |
| Exxon Mobil Corp |
| Western Copper |
Exxon and Western Copper Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Western Copper
The main advantage of trading using opposite Exxon and Western Copper positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Western Copper 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 Western Copper will offset losses from the drop in Western Copper's long position.The idea behind Exxon Mobil Corp and Western Copper and 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.| Western Copper vs. NioCorp Developments Ltd | Western Copper vs. Teck Resources Ltd | Western Copper vs. Sigma Lithium Resources | Western Copper vs. MP Materials Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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