Correlation Between Exxon and Dream Industrial

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

Diversification Opportunities for Exxon and Dream Industrial

-0.74

Correlation Coefficient

Exxon  Dream Industrial

Pay attention - limited upside

The 3 months correlation between Exxon and Dream is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Dream Industrial Real in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dream Industrial Real 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 Dream Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dream Industrial Real has no effect on the direction of Exxon i.e., Exxon and Dream Industrial go up and down completely randomly.

Pair Corralation between Exxon and Dream Industrial

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.97 times more return on investment than Dream Industrial. However, Exxon Mobil Corp is 1.03 times less risky than Dream Industrial. It trades about -0.11 of its potential returns per unit of risk. Dream Industrial Real is currently generating about -0.12 per unit of risk. If you would invest  11,928  in Exxon Mobil Corp on February 2, 2024 and sell it today you would lose (325.00) from holding Exxon Mobil Corp or give up 2.72% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Exxon Mobil Corp  vs.  Dream Industrial Real

Exxon Mobil Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 16 (%) 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.

Dream Industrial Real

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dream Industrial Real has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Exxon and Dream Industrial

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

The idea behind Exxon Mobil Corp and Dream Industrial Real 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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.