Correlation Between Exxon and Laboratory

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

Diversification Opportunities for Exxon and Laboratory

-0.8
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Exxon and Laboratory is -0.8. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Laboratory Of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Laboratory 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 Laboratory. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Laboratory has no effect on the direction of Exxon i.e., Exxon and Laboratory go up and down completely randomly.

Pair Corralation between Exxon and Laboratory

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.21 times more return on investment than Laboratory. However, Exxon is 1.21 times more volatile than Laboratory. It trades about 0.03 of its potential returns per unit of risk. Laboratory is currently generating about 0.01 per unit of risk. If you would invest  9,728  in Exxon Mobil Corp on December 29, 2023 and sell it today you would earn a total of  1,769  from holding Exxon Mobil Corp or generate 18.18% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Laboratory Of

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

17 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 17 (%) 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.
Laboratory 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Laboratory has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Laboratory is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Exxon and Laboratory Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Laboratory

The main advantage of trading using opposite Exxon and Laboratory positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Laboratory 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 Laboratory will offset losses from the drop in Laboratory's long position.
The idea behind Exxon Mobil Corp and Laboratory 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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