Correlation Between Arch Resources and Exxon
Can any of the company-specific risk be diversified away by investing in both Arch Resources and Exxon 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 Arch Resources and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Arch Resources and Exxon Mobil Corp, you can compare the effects of market volatilities on Arch Resources and Exxon 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 Arch Resources with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Arch Resources and Exxon.
Diversification Opportunities for Arch Resources and Exxon
-0.7 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Arch and Exxon is -0.7. Overlapping area represents the amount of risk that can be diversified away by holding Arch Resources and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Arch Resources 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 Arch Resources are associated (or correlated) with Exxon. 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 Corp has no effect on the direction of Arch Resources i.e., Arch Resources and Exxon go up and down completely randomly.
Pair Corralation between Arch Resources and Exxon
Given the investment horizon of 90 days Arch Resources is expected to under-perform the Exxon. In addition to that, Arch Resources is 2.78 times more volatile than Exxon Mobil Corp. It trades about -0.05 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.47 per unit of volatility. If you would invest 10,384 in Exxon Mobil Corp on January 24, 2024 and sell it today you would earn a total of 1,719 from holding Exxon Mobil Corp or generate 16.55% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Arch Resources vs. Exxon Mobil Corp
Performance |
Timeline |
Arch Resources |
Exxon Mobil Corp |
Arch Resources and Exxon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Arch Resources and Exxon
The main advantage of trading using opposite Arch Resources and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Arch Resources position performs unexpectedly, Exxon 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 will offset losses from the drop in Exxon's long position.Arch Resources vs. Westwater Resources | Arch Resources vs. Aqua Metals | Arch Resources vs. Pioneer Power Solutions | Arch Resources vs. Hall of Fame |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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