Correlation Between Apple and Exxon Mobil

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

By analyzing existing cross correlation between Apple Inc and Exxon Mobil, you can compare the effects of market volatilities on Apple and Exxon Mobil 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 Apple with a short position of Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Exxon Mobil.

Diversification Opportunities for Apple and Exxon Mobil

0.51

Correlation Coefficient

Apple  Exxon Mobil

Very weak diversification

The 3 months correlation between Apple and Exxon is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Apple 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 Apple Inc are associated (or correlated) with Exxon Mobil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil has no effect on the direction of Apple i.e., Apple and Exxon Mobil go up and down completely randomly.

Pair Corralation between Apple and Exxon Mobil

Assuming the 90 days trading horizon Apple Inc is expected to generate 0.85 times more return on investment than Exxon Mobil. However, Apple Inc is 1.18 times less risky than Exxon Mobil. It trades about 0.2 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.08 per unit of risk. If you would invest  20,131  in Apple Inc on September 13, 2024 and sell it today you would earn a total of  3,549  from holding Apple Inc or generate 17.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Apple Inc  vs.  Exxon Mobil

Apple Inc

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple unveiled solid returns over the last few months and may actually be approaching a breakup point.

Exxon Mobil

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Exxon Mobil may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Apple and Exxon Mobil

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

The idea behind Apple Inc and Exxon Mobil 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.