Correlation Between Exxon and Uber Technologies

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

Diversification Opportunities for Exxon and Uber Technologies

-0.23
  Correlation Coefficient

Very good diversification

The 3 months correlation between Exxon and Uber is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Uber Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uber Technologies 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 Uber Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uber Technologies has no effect on the direction of Exxon i.e., Exxon and Uber Technologies go up and down completely randomly.

Pair Corralation between Exxon and Uber Technologies

Considering the 90-day investment horizon Exxon is expected to generate 2.95 times less return on investment than Uber Technologies. But when comparing it to its historical volatility, Exxon Mobil Corp is 1.97 times less risky than Uber Technologies. It trades about 0.05 of its potential returns per unit of risk. Uber Technologies is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  6,360  in Uber Technologies on April 23, 2024 and sell it today you would earn a total of  413.00  from holding Uber Technologies or generate 6.49% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Exxon Mobil Corp  vs.  Uber Technologies

 Performance 
       Timeline  
Exxon Mobil Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.
Uber Technologies 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Uber Technologies has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Uber Technologies is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Exxon and Uber Technologies Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Exxon and Uber Technologies

The main advantage of trading using opposite Exxon and Uber Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Uber Technologies 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 Uber Technologies will offset losses from the drop in Uber Technologies' long position.
The idea behind Exxon Mobil Corp and Uber Technologies 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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