Correlation Between Exxon and Global X

Can any of the company-specific risk be diversified away by investing in both Exxon and Global X 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 Global X 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 Global X Cybersecurity, you can compare the effects of market volatilities on Exxon and Global X 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 Global X. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Global X.

Diversification Opportunities for Exxon and Global X

-0.69

Correlation Coefficient

Exxon  Global X

Excellent diversification

The 3 months correlation between Exxon and Global is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Global X Cybersecurity in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global X Cybersecurity 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 Global X. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global X Cybersecurity has no effect on the direction of Exxon i.e., Exxon and Global X go up and down completely randomly.

Pair Corralation between Exxon and Global X

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.63 times more return on investment than Global X. However, Exxon Mobil Corp is 1.58 times less risky than Global X. It trades about 0.27 of its potential returns per unit of risk. Global X Cybersecurity is currently generating about -0.03 per unit of risk. If you would invest  10,192  in Exxon Mobil Corp on February 20, 2024 and sell it today you would earn a total of  1,772  from holding Exxon Mobil Corp or generate 17.39% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Global X Cybersecurity

Exxon Mobil Corp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Global X Cybersecurity

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Global X Cybersecurity has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Global X is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Exxon and Global X

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

The idea behind Exxon Mobil Corp and Global X Cybersecurity 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.

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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.