Correlation Between Meta Platforms and Exxon

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

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

Diversification Opportunities for Meta Platforms and Exxon

-0.25

Correlation Coefficient

Meta Platforms  Exxon

Very good diversification

The 3 months correlation between Meta and Exxon is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms CDR and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR and Meta Platforms 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 Meta Platforms CDR are associated (or correlated) with Exxon. 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 CDR has no effect on the direction of Meta Platforms i.e., Meta Platforms and Exxon go up and down completely randomly.

Pair Corralation between Meta Platforms and Exxon

Assuming the 90 days trading horizon Meta Platforms CDR is expected to under-perform the Exxon. In addition to that, Meta Platforms is 1.18 times more volatile than EXXON MOBIL CDR. It trades about -0.01 of its total potential returns per unit of risk. EXXON MOBIL CDR is currently generating about 0.1 per unit of volatility. If you would invest  1,962  in EXXON MOBIL CDR on December 30, 2024 and sell it today you would earn a total of  224.00  from holding EXXON MOBIL CDR or generate 11.42% return on investment over 90 days.

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

Meta Platforms CDR  vs.  EXXON MOBIL CDR

Meta Platforms CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days Meta Platforms CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Meta Platforms is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

EXXON MOBIL CDR

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EXXON MOBIL CDR are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Meta Platforms and Exxon

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

The idea behind Meta Platforms CDR and EXXON MOBIL CDR 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.