Correlation Between Exxon and SPDR Morgan
Can any of the company-specific risk be diversified away by investing in both Exxon and SPDR Morgan 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 Morgan 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 Morgan Stanley, you can compare the effects of market volatilities on Exxon and SPDR Morgan 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 Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and SPDR Morgan.
Diversification Opportunities for Exxon and SPDR Morgan
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and SPDR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and SPDR Morgan Stanley in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPDR Morgan Stanley 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 Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPDR Morgan Stanley has no effect on the direction of Exxon i.e., Exxon and SPDR Morgan go up and down completely randomly.
Pair Corralation between Exxon and SPDR Morgan
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.0 times more return on investment than SPDR Morgan. However, Exxon is 1.0 times more volatile than SPDR Morgan Stanley. It trades about 0.05 of its potential returns per unit of risk. SPDR Morgan Stanley is currently generating about 0.03 per unit of risk. If you would invest 11,632 in Exxon Mobil Corp on August 30, 2024 and sell it today you would earn a total of 134.00 from holding Exxon Mobil Corp or generate 1.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Exxon Mobil Corp vs. SPDR Morgan Stanley
Performance |
| Timeline |
| Exxon Mobil Corp |
| SPDR Morgan Stanley |
Exxon and SPDR Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and SPDR Morgan
The main advantage of trading using opposite Exxon and SPDR Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, SPDR Morgan 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 Morgan will offset losses from the drop in SPDR Morgan's long position.| Exxon vs. BP PLC ADR | Exxon vs. Shell PLC ADR | Exxon vs. Petroleo Brasileiro Petrobras | Exxon vs. Suncor Energy |
| SPDR Morgan vs. SPDR FactSet Innovative | SPDR Morgan vs. SPDR SP Software | SPDR Morgan vs. SPDR SP Health | SPDR Morgan vs. iShares Expanded Tech |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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