Correlation Between Ford and Exxon
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Exxon Mobil Corp, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Exxon.
Diversification Opportunities for Ford and Exxon
Poor diversification
The 3 months correlation between Ford and Exxon is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Ford 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 Ford Motor 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 Corp has no effect on the direction of Ford i.e., Ford and Exxon go up and down completely randomly.
Pair Corralation between Ford and Exxon
Taking into account the 90-day investment horizon Ford is expected to generate 2.43 times less return on investment than Exxon. In addition to that, Ford is 1.38 times more volatile than Exxon Mobil Corp. It trades about 0.01 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.05 per unit of volatility. If you would invest 8,089 in Exxon Mobil Corp on December 29, 2023 and sell it today you would earn a total of 3,535 from holding Exxon Mobil Corp or generate 43.7% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Ford Motor vs. Exxon Mobil Corp
Performance |
Timeline |
Ford Motor |
Exxon Mobil Corp |
Ford and Exxon Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Ford and Exxon
The main advantage of trading using opposite Ford and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.Ford vs. GreenPower Motor | Ford vs. Li AutoInc | Ford vs. Lotus Technology Warrants | Ford vs. Mullen Automotive |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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