Correlation Between Exxon and Range Resources

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

Diversification Opportunities for Exxon and Range Resources

0.79
  Correlation Coefficient

Poor diversification

The 3 months correlation between Exxon and Range is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Range Resources Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Range Resources Corp 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 Range Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Range Resources Corp has no effect on the direction of Exxon i.e., Exxon and Range Resources go up and down completely randomly.

Pair Corralation between Exxon and Range Resources

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.58 times more return on investment than Range Resources. However, Exxon Mobil Corp is 1.74 times less risky than Range Resources. It trades about 0.05 of its potential returns per unit of risk. Range Resources Corp is currently generating about 0.02 per unit of risk. If you would invest  7,811  in Exxon Mobil Corp on December 30, 2023 and sell it today you would earn a total of  3,813  from holding Exxon Mobil Corp or generate 48.82% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Range Resources Corp

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

16 of 100

 
Low
 
High
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating basic indicators, Exxon displayed solid returns over the last few months and may actually be approaching a breakup point.
Range Resources Corp 

Risk-Adjusted Performance

8 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Range Resources Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Range Resources exhibited solid returns over the last few months and may actually be approaching a breakup point.

Exxon and Range Resources Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Range Resources

The main advantage of trading using opposite Exxon and Range Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Range Resources 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 Range Resources will offset losses from the drop in Range Resources' long position.
The idea behind Exxon Mobil Corp and Range Resources Corp 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.
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..

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