Correlation Between Fibra Mty and Exxon

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

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

Diversification Opportunities for Fibra Mty and Exxon

-0.92

Correlation Coefficient

Fibra Mty  Exxon

Pay attention - limited upside

The 3 months correlation between Fibra and Exxon is -0.92. Overlapping area represents the amount of risk that can be diversified away by holding Fibra Mty SAPI and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Fibra Mty 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 Fibra Mty SAPI 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 has no effect on the direction of Fibra Mty i.e., Fibra Mty and Exxon go up and down completely randomly.

Pair Corralation between Fibra Mty and Exxon

Assuming the 90 days trading horizon Fibra Mty SAPI is expected to under-perform the Exxon. In addition to that, Fibra Mty is 1.1 times more volatile than Exxon Mobil. It trades about -0.25 of its total potential returns per unit of risk. Exxon Mobil is currently generating about -0.02 per unit of volatility. If you would invest  198,180  in Exxon Mobil on February 7, 2024 and sell it today you would lose (1,480) from holding Exxon Mobil or give up 0.75% of portfolio value over 90 days.

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

Fibra Mty SAPI  vs.  Exxon Mobil

Fibra Mty SAPI

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fibra Mty SAPI has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Exxon Mobil

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak primary indicators, Exxon showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fibra Mty and Exxon

The main advantage of trading using opposite Fibra Mty and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fibra Mty 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 Fibra Mty SAPI and Exxon Mobil 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.