Correlation Between Exxon and WuXi Biologics
Can any of the company-specific risk be diversified away by investing in both Exxon and WuXi Biologics 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 WuXi Biologics 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 WuXi Biologics, you can compare the effects of market volatilities on Exxon and WuXi Biologics 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 WuXi Biologics. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and WuXi Biologics.
Diversification Opportunities for Exxon and WuXi Biologics
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and WuXi is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and WuXi Biologics in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WuXi Biologics 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 WuXi Biologics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WuXi Biologics has no effect on the direction of Exxon i.e., Exxon and WuXi Biologics go up and down completely randomly.
Pair Corralation between Exxon and WuXi Biologics
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.26 times more return on investment than WuXi Biologics. However, Exxon Mobil Corp is 3.86 times less risky than WuXi Biologics. It trades about 0.07 of its potential returns per unit of risk. WuXi Biologics is currently generating about -0.03 per unit of risk. If you would invest 9,633 in Exxon Mobil Corp on September 4, 2024 and sell it today you would earn a total of 2,134 from holding Exxon Mobil Corp or generate 22.15% 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. WuXi Biologics
Performance |
| Timeline |
| Exxon Mobil Corp |
| WuXi Biologics |
Exxon and WuXi Biologics Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and WuXi Biologics
The main advantage of trading using opposite Exxon and WuXi Biologics positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, WuXi Biologics 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 WuXi Biologics will offset losses from the drop in WuXi Biologics' long position.The idea behind Exxon Mobil Corp and WuXi Biologics 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.| WuXi Biologics vs. Inhibikase Therapeutics | WuXi Biologics vs. Corcept Therapeutics Incorporated | WuXi Biologics vs. Cardio Diagnostics Holdings | WuXi Biologics vs. Revolution Medicines |
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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