Correlation Between Exxon Mobil and EQUINOR ASA

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

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

Diversification Opportunities for Exxon Mobil and EQUINOR ASA

0.56

Correlation Coefficient

Exxon Mobil  EQUINOR ASA

Very weak diversification

The 3 months correlation between Exxon and EQUINOR is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and EQUINOR ASA DRN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EQUINOR ASA DRN and Exxon Mobil 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 are associated (or correlated) with EQUINOR ASA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EQUINOR ASA DRN has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and EQUINOR ASA go up and down completely randomly.

Pair Corralation between Exxon Mobil and EQUINOR ASA

Assuming the 90 days trading horizon Exxon Mobil is expected to generate 7.15 times less return on investment than EQUINOR ASA. But when comparing it to its historical volatility, Exxon Mobil is 1.33 times less risky than EQUINOR ASA. It trades about 0.01 of its potential returns per unit of risk. EQUINOR ASA DRN is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  6,843  in EQUINOR ASA DRN on December 24, 2024 and sell it today you would earn a total of  510.00  from holding EQUINOR ASA DRN or generate 7.45% return on investment over 90 days.

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

Exxon Mobil  vs.  EQUINOR ASA DRN

Exxon Mobil

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxon Mobil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Exxon Mobil is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

EQUINOR ASA DRN

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in EQUINOR ASA DRN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, EQUINOR ASA may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Exxon Mobil and EQUINOR ASA

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

The idea behind Exxon Mobil and EQUINOR ASA DRN 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.