Correlation Between Exxon and PIMCO 15

Can any of the company-specific risk be diversified away by investing in both Exxon and PIMCO 15 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 PIMCO 15 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 PIMCO 15 Year, you can compare the effects of market volatilities on Exxon and PIMCO 15 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 PIMCO 15. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and PIMCO 15.

Diversification Opportunities for Exxon and PIMCO 15

-0.52

Correlation Coefficient

Exxon  PIMCO 15

Excellent diversification

The 3 months correlation between Exxon and PIMCO is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and PIMCO 15 Year in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PIMCO 15 Year 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 PIMCO 15. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PIMCO 15 Year has no effect on the direction of Exxon i.e., Exxon and PIMCO 15 go up and down completely randomly.

Pair Corralation between Exxon and PIMCO 15

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.4 times more return on investment than PIMCO 15. However, Exxon is 1.4 times more volatile than PIMCO 15 Year. It trades about 0.09 of its potential returns per unit of risk. PIMCO 15 Year is currently generating about -0.11 per unit of risk. If you would invest  11,929  in Exxon Mobil Corp on August 24, 2024 and sell it today you would earn a total of  264.00  from holding Exxon Mobil Corp or generate 2.21% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  PIMCO 15 Year

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

PIMCO 15 Year

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PIMCO 15 Year has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, PIMCO 15 is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and PIMCO 15

The main advantage of trading using opposite Exxon and PIMCO 15 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, PIMCO 15 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 PIMCO 15 will offset losses from the drop in PIMCO 15's long position.

The idea behind Exxon Mobil Corp and PIMCO 15 Year 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.