Correlation Between Exxon and United States
Can any of the company-specific risk be diversified away by investing in both Exxon and United States 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 United States 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 United States Oil, you can compare the effects of market volatilities on Exxon and United States 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 United States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and United States.
Diversification Opportunities for Exxon and United States
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Exxon and United is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and United States Oil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United States Oil 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 United States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United States Oil has no effect on the direction of Exxon i.e., Exxon and United States go up and down completely randomly.
Pair Corralation between Exxon and United States
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.8 times more return on investment than United States. However, Exxon Mobil Corp is 1.25 times less risky than United States. It trades about 0.33 of its potential returns per unit of risk. United States Oil is currently generating about 0.09 per unit of risk. If you would invest 11,299 in Exxon Mobil Corp on January 20, 2024 and sell it today you would earn a total of 689.00 from holding Exxon Mobil Corp or generate 6.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Exxon Mobil Corp vs. United States Oil
Performance |
| Timeline |
| Exxon Mobil Corp |
| United States Oil |
Exxon and United States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and United States
The main advantage of trading using opposite Exxon and United States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, United States 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 United States will offset losses from the drop in United States' long position.The idea behind Exxon Mobil Corp and United States Oil 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.| United States vs. United States Natural | United States vs. SPDR Gold Shares | United States vs. ProShares Ultra Bloomberg | United States vs. Energy Select Sector |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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