Correlation Between Exxon and Multi Manager

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

Diversification Opportunities for Exxon and Multi Manager

0.49

Correlation Coefficient

Exxon  Multi Manager

Very weak diversification

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

Pair Corralation between Exxon and Multi Manager

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.6 times more return on investment than Multi Manager. However, Exxon is 1.6 times more volatile than Multi Manager Inv. It trades about 0.3 of its potential returns per unit of risk. Multi Manager Inv is currently generating about -0.58 per unit of risk. If you would invest  11,465  in Exxon Mobil Corp on January 24, 2024 and sell it today you would earn a total of  591.00  from holding Exxon Mobil Corp or generate 5.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	15.0%
Values	Daily Returns

Exxon Mobil Corp  vs.  Multi Manager Inv

Exxon Mobil Corp

Risk-Adjusted Performance

25 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 25 (%) 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.

Multi Manager Inv

Risk-Adjusted Performance

0 of 100

Strong

Over the last 90 days Multi Manager Inv has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak essential indicators, Multi Manager sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Multi Manager

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

The idea behind Exxon Mobil Corp and Multi Manager Inv 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.