Correlation Between Exxon Mobil and Visa

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

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

Diversification Opportunities for Exxon Mobil and Visa

0.32

Correlation Coefficient

Exxon Mobil  Visa

Weak diversification

The 3 months correlation between Exxon and Visa is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Visa Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Visa Inc and Exxon Mobil 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 are associated (or correlated) with Visa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Visa Inc has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and Visa go up and down completely randomly.

Pair Corralation between Exxon Mobil and Visa

Assuming the 90 days trading horizon Exxon Mobil is expected to generate 1.09 times more return on investment than Visa. However, Exxon Mobil is 1.09 times more volatile than Visa Inc. It trades about 0.26 of its potential returns per unit of risk. Visa Inc is currently generating about 0.07 per unit of risk. If you would invest  6,253  in Exxon Mobil on February 14, 2024 and sell it today you would earn a total of  1,323  from holding Exxon Mobil or generate 21.16% return on investment over 90 days.

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

Exxon Mobil  vs.  Visa Inc

Exxon Mobil

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Exxon Mobil sustained solid returns over the last few months and may actually be approaching a breakup point.

Visa Inc

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Visa Inc are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Visa is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon Mobil and Visa

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

The idea behind Exxon Mobil and Visa Inc 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.