Correlation Between Exxon and Air France
Can any of the company-specific risk be diversified away by investing in both Exxon and Air France 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 Air France 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 Air France KLM, you can compare the effects of market volatilities on Exxon and Air France 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 Air France. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Air France.
Diversification Opportunities for Exxon and Air France
-0.86 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Exxon and Air is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Air France KLM in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air France KLM 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 Air France. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air France KLM has no effect on the direction of Exxon i.e., Exxon and Air France go up and down completely randomly.
Pair Corralation between Exxon and Air France
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.45 times more return on investment than Air France. However, Exxon Mobil Corp is 2.24 times less risky than Air France. It trades about 0.05 of its potential returns per unit of risk. Air France KLM is currently generating about -0.04 per unit of risk. If you would invest 8,085 in Exxon Mobil Corp on January 31, 2024 and sell it today you would earn a total of 3,879 from holding Exxon Mobil Corp or generate 47.98% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. Air France KLM
Performance |
Timeline |
Exxon Mobil Corp |
Air France KLM |
Exxon and Air France Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and Air France
The main advantage of trading using opposite Exxon and Air France positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Air France 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 Air France will offset losses from the drop in Air France's long position.The idea behind Exxon Mobil Corp and Air France KLM 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.Air France vs. Remote Dynamics | Air France vs. Wellstar International | Air France vs. Encounter Technologi | Air France vs. Health Sciences Gr |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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