Correlation Between Chevron and Exxon Mobil

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

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

Diversification Opportunities for Chevron and Exxon Mobil

0.58

Correlation Coefficient

Chevron  Exxon Mobil

Very weak diversification

The 3 months correlation between Chevron and Exxon is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Chevron 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 Chevron 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 Chevron i.e., Chevron and Exxon Mobil go up and down completely randomly.

Pair Corralation between Chevron and Exxon Mobil

Assuming the 90 days horizon Chevron is expected to under-perform the Exxon Mobil. In addition to that, Chevron is 1.21 times more volatile than Exxon Mobil. It trades about -0.39 of its total potential returns per unit of risk. Exxon Mobil is currently generating about -0.38 per unit of volatility. If you would invest  11,190  in Exxon Mobil on October 2, 2024 and sell it today you would lose (948.00) from holding Exxon Mobil or give up 8.47% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Chevron  vs.  Exxon Mobil

Chevron

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Chevron are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Chevron is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Exxon Mobil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Exxon Mobil is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Chevron and Exxon Mobil

The main advantage of trading using opposite Chevron and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron 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 Chevron 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.

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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 Valuation module to check real value of public entities based on technical and fundamental data.