Correlation Between Exxon and Adams Natural

Can any of the company-specific risk be diversified away by investing in both Exxon and Adams Natural 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 Adams Natural 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 Adams Natural Resources, you can compare the effects of market volatilities on Exxon and Adams Natural 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 Adams Natural. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Adams Natural.

Diversification Opportunities for Exxon and Adams Natural

0.72

Correlation Coefficient

Exxon  Adams Natural

Poor diversification

The 3 months correlation between Exxon and Adams is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Adams Natural Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Natural Resources 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 Adams Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Natural Resources has no effect on the direction of Exxon i.e., Exxon and Adams Natural go up and down completely randomly.

Pair Corralation between Exxon and Adams Natural

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 1.22 times more return on investment than Adams Natural. However, Exxon is 1.22 times more volatile than Adams Natural Resources. It trades about 0.14 of its potential returns per unit of risk. Adams Natural Resources is currently generating about 0.15 per unit of risk. If you would invest  10,554  in Exxon Mobil Corp on December 27, 2024 and sell it today you would earn a total of  1,273  from holding Exxon Mobil Corp or generate 12.06% return on investment over 90 days.

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

Exxon Mobil Corp  vs.  Adams Natural Resources

Exxon Mobil Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Adams Natural Resources

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Adams Natural Resources are ranked lower than 11 (%) of all funds and portfolios of funds over the last 90 days. In spite of very fragile technical and fundamental indicators, Adams Natural may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Exxon and Adams Natural

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

The idea behind Exxon Mobil Corp and Adams Natural Resources 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.