Correlation Between Exxon and Pioneer Natural
Can any of the company-specific risk be diversified away by investing in both Exxon and Pioneer Natural 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 Pioneer Natural 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 Pioneer Natural Resources, you can compare the effects of market volatilities on Exxon and Pioneer Natural 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 Pioneer Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Pioneer Natural.
Diversification Opportunities for Exxon and Pioneer Natural
1.0 | Correlation Coefficient |
No risk reduction
The 3 months correlation between Exxon and Pioneer is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Pioneer Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pioneer Natural Resources 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 Pioneer Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pioneer Natural Resources has no effect on the direction of Exxon i.e., Exxon and Pioneer Natural go up and down completely randomly.
Pair Corralation between Exxon and Pioneer Natural
Considering the 90-day investment horizon Exxon is expected to generate 1.03 times less return on investment than Pioneer Natural. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.06 times less risky than Pioneer Natural. It trades about 0.4 of its potential returns per unit of risk. Pioneer Natural Resources is currently generating about 0.39 of returns per unit of risk over similar time horizon. If you would invest 25,195 in Pioneer Natural Resources on January 17, 2024 and sell it today you would earn a total of 1,705 from holding Pioneer Natural Resources or generate 6.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Pioneer Natural Resources
Performance |
| Timeline |
| Exxon Mobil Corp |
| Pioneer Natural Resources |
Exxon and Pioneer Natural Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Pioneer Natural
The main advantage of trading using opposite Exxon and Pioneer Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Pioneer Natural 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 Pioneer Natural will offset losses from the drop in Pioneer Natural's long position.The idea behind Exxon Mobil Corp and Pioneer Natural Resources 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.| Pioneer Natural vs. Coterra Energy | Pioneer Natural vs. Occidental Petroleum | Pioneer Natural vs. Diamondback Energy | Pioneer Natural vs. ConocoPhillips |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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