Correlation Between Exxon and Burford Capital

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

Diversification Opportunities for Exxon and Burford Capital

0.49

Correlation Coefficient

Exxon  Burford Capital

Very weak diversification

The 3 months correlation between Exxon and Burford is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Burford Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burford Capital 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 Burford Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burford Capital has no effect on the direction of Exxon i.e., Exxon and Burford Capital go up and down completely randomly.

Pair Corralation between Exxon and Burford Capital

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.34 times more return on investment than Burford Capital. However, Exxon Mobil Corp is 2.93 times less risky than Burford Capital. It trades about 0.28 of its potential returns per unit of risk. Burford Capital is currently generating about 0.08 per unit of risk. If you would invest  11,309  in Exxon Mobil Corp on January 19, 2024 and sell it today you would earn a total of  554.00  from holding Exxon Mobil Corp or generate 4.9% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Burford Capital

Exxon Mobil Corp

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 26 (%) 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.

Burford Capital

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Burford Capital are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Burford Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Exxon and Burford Capital

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

The idea behind Exxon Mobil Corp and Burford Capital 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.