Correlation Between Ameriprise Financial and Exxon Mobil

Can any of the company-specific risk be diversified away by investing in both Ameriprise Financial and Exxon Mobil 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 Ameriprise Financial and Exxon Mobil into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ameriprise Financial and Exxon Mobil, you can compare the effects of market volatilities on Ameriprise Financial and Exxon Mobil 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 Ameriprise Financial with a short position of Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ameriprise Financial and Exxon Mobil.

Diversification Opportunities for Ameriprise Financial and Exxon Mobil

0.29

Correlation Coefficient

Ameriprise Financial  Exxon Mobil

Modest diversification

The 3 months correlation between Ameriprise and Exxon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Ameriprise Financial and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Ameriprise Financial 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 Ameriprise Financial are associated (or correlated) with Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Ameriprise Financial i.e., Ameriprise Financial and Exxon Mobil go up and down completely randomly.

Pair Corralation between Ameriprise Financial and Exxon Mobil

Assuming the 90 days trading horizon Ameriprise Financial is expected to generate 1.15 times less return on investment than Exxon Mobil. But when comparing it to its historical volatility, Ameriprise Financial is 1.06 times less risky than Exxon Mobil. It trades about 0.18 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  6,428  in Exxon Mobil on February 28, 2024 and sell it today you would earn a total of  952.00  from holding Exxon Mobil or generate 14.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Ameriprise Financial  vs.  Exxon Mobil

Ameriprise Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ameriprise Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Ameriprise Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Exxon Mobil

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Exxon Mobil sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Ameriprise Financial and Exxon Mobil

The main advantage of trading using opposite Ameriprise Financial and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ameriprise Financial position performs unexpectedly, Exxon Mobil 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 Exxon Mobil will offset losses from the drop in Exxon Mobil's long position.

The idea behind Ameriprise Financial and Exxon Mobil 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.

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.