Correlation Between Exxon and Innovator

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

By analyzing existing cross correlation between Exxon Mobil Corp and Innovator SP 500, you can compare the effects of market volatilities on Exxon and Innovator 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 with a short position of Innovator. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Innovator.

Diversification Opportunities for Exxon and Innovator

-0.51

Correlation Coefficient

Exxon  Innovator

Excellent diversification

The 3 months correlation between Exxon and Innovator is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Innovator SP 500 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Innovator SP 500 and Exxon 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 Corp are associated (or correlated) with Innovator. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Innovator SP 500 has no effect on the direction of Exxon i.e., Exxon and Innovator go up and down completely randomly.

Pair Corralation between Exxon and Innovator

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Innovator. In addition to that, Exxon is 1.74 times more volatile than Innovator SP 500. It trades about -0.42 of its total potential returns per unit of risk. Innovator SP 500 is currently generating about -0.12 per unit of volatility. If you would invest  4,499  in Innovator SP 500 on October 4, 2024 and sell it today you would lose (68.00) from holding Innovator SP 500 or give up 1.51% of portfolio value over 90 days.

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

Exxon Mobil Corp  vs.  Innovator SP 500

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Innovator SP 500

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Innovator SP 500 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Innovator is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Exxon and Innovator

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

The idea behind Exxon Mobil Corp and Innovator SP 500 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.