Correlation Between Reliance Industries and Exxon Mobil

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

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

Diversification Opportunities for Reliance Industries and Exxon Mobil

0.4

Correlation Coefficient

Reliance Industries  Exxon Mobil

Very weak diversification

The 3 months correlation between Reliance and Exxon is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Reliance Industries 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 Reliance Industries Limited 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 Reliance Industries i.e., Reliance Industries and Exxon Mobil go up and down completely randomly.

Pair Corralation between Reliance Industries and Exxon Mobil

Assuming the 90 days horizon Reliance Industries Limited is expected to generate 1.03 times more return on investment than Exxon Mobil. However, Reliance Industries is 1.03 times more volatile than Exxon Mobil. It trades about 0.03 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.02 per unit of risk. If you would invest  4,902  in Reliance Industries Limited on October 20, 2024 and sell it today you would earn a total of  718.00  from holding Reliance Industries Limited or generate 14.65% return on investment over 90 days.

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

Reliance Industries Limited  vs.  Exxon Mobil

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Reliance Industries is not utilizing all of its potentials. The current 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 Reliance Industries and Exxon Mobil

The main advantage of trading using opposite Reliance Industries and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Limited 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.