Correlation Between Dupont De and Exxon

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

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

Diversification Opportunities for Dupont De and Exxon

0.73

Correlation Coefficient

Dupont De  Exxon

Poor diversification

The 3 months correlation between Dupont and Exxon is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours 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 Dupont De 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 Dupont De Nemours 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 Dupont De i.e., Dupont De and Exxon go up and down completely randomly.

Pair Corralation between Dupont De and Exxon

Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.91 times less return on investment than Exxon. In addition to that, Dupont De is 1.02 times more volatile than Exxon Mobil Corp. It trades about 0.03 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.05 per unit of volatility. If you would invest  8,412  in Exxon Mobil Corp on January 25, 2024 and sell it today you would earn a total of  3,691  from holding Exxon Mobil Corp or generate 43.88% return on investment over 90 days.

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

Dupont De Nemours  vs.  Exxon Mobil Corp

Dupont De Nemours

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dupont De Nemours are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating fundamental indicators, Dupont De exhibited solid returns over the last few months and may actually be approaching a breakup point.

Exxon Mobil Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dupont De and Exxon

The main advantage of trading using opposite Dupont De and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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.

The idea behind Dupont De Nemours and Exxon Mobil Corp 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..