Correlation Between Suncor Energy and Exxon

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

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

Diversification Opportunities for Suncor Energy and Exxon

0.39

Correlation Coefficient

Suncor Energy  Exxon

Weak diversification

The 3 months correlation between Suncor and Exxon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy 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 Suncor Energy 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 Suncor Energy 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 Suncor Energy i.e., Suncor Energy and Exxon go up and down completely randomly.

Pair Corralation between Suncor Energy and Exxon

Assuming the 90 days horizon Suncor Energy is expected to under-perform the Exxon. But the stock apears to be less risky and, when comparing its historical volatility, Suncor Energy is 1.02 times less risky than Exxon. The stock trades about -0.07 of its potential returns per unit of risk. The EXXON MOBIL CDR is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  2,131  in EXXON MOBIL CDR on December 5, 2024 and sell it today you would lose (133.00) from holding EXXON MOBIL CDR or give up 6.24% of portfolio value over 90 days.

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

Suncor Energy  vs.  EXXON MOBIL CDR

Suncor Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Suncor Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

EXXON MOBIL CDR

Risk-Adjusted Performance

Very Weak

Over the last 90 days EXXON MOBIL CDR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Suncor Energy and Exxon

The main advantage of trading using opposite Suncor Energy and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor Energy 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 Suncor Energy 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.