Correlation Between Exxon and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Exxon and Meta Platforms 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 Meta Platforms 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 Meta Platforms, you can compare the effects of market volatilities on Exxon and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Meta Platforms.
Diversification Opportunities for Exxon and Meta Platforms
0.66 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Meta is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Meta Platforms in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms 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 Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms has no effect on the direction of Exxon i.e., Exxon and Meta Platforms go up and down completely randomly.
Pair Corralation between Exxon and Meta Platforms
Considering the 90-day investment horizon Exxon is expected to generate 5.3 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.65 times less risky than Meta Platforms. It trades about 0.03 of its potential returns per unit of risk. Meta Platforms is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 28,098 in Meta Platforms on September 7, 2024 and sell it today you would earn a total of 33,124 from holding Meta Platforms or generate 117.89% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Exxon Mobil Corp vs. Meta Platforms
Performance |
Timeline |
Exxon Mobil Corp |
Meta Platforms |
Exxon and Meta Platforms Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Exxon and Meta Platforms
The main advantage of trading using opposite Exxon and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.Exxon vs. Coca Cola Consolidated | Exxon vs. SEI Investments | Exxon vs. Embecta Corp | Exxon vs. Coca Cola Femsa SAB |
Meta Platforms vs. Alphabet Inc Class A | Meta Platforms vs. Twilio Inc | Meta Platforms vs. Snap Inc | Meta Platforms vs. Baidu Inc |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
Other Complementary Tools
Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities | |
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
Portfolio Rebalancing Analyze risk-adjusted returns against different time horizons to find asset-allocation targets |