Correlation Between Exxon and Ford

By analyzing existing cross correlation between Exxon Mobil Corp and Ford Motor, you can compare the effects of market volatilities on Exxon and Ford 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 Ford. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Ford.

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

Diversification Opportunities for Exxon and Ford

0.95
  Correlation Coefficient
Exxon Mobil Corp
Ford Motor

Almost no diversification

The 3 months correlation between Exxon and Ford is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Ford Motor in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Ford Motor 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 Ford. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ford Motor has no effect on the direction of Exxon i.e., Exxon and Ford go up and down completely randomly.

Pair Corralation between Exxon and Ford

Considering the 90-day investment horizon Exxon is expected to generate 1.12 times less return on investment than Ford. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.16 times less risky than Ford. It trades about 0.13 of its potential returns per unit of risk. Ford Motor is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  771.00  in Ford Motor on July 28, 2021 and sell it today you would earn a total of  810.00  from holding Ford Motor or generate 105.06% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Ford Motor

 Performance (%) 
      Timeline 
Exxon Mobil Corp 
 Exxon Performance
7 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in November 2021.

Exxon Price Channel

Ford Motor 
 Ford Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting technical and fundamental indicators, Ford exhibited solid returns over the last few months and may actually be approaching a breakup point.

Ford Price Channel

Exxon and Ford Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Exxon and Ford

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

Ford Motor

Pair trading matchups for Ford

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.

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