Correlation Between Exxon and Unit

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

Diversification Opportunities for Exxon and Unit

-0.02

Correlation Coefficient

Exxon  Unit

Good diversification

The 3 months correlation between Exxon and Unit is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Unit Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Unit 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 Unit. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Unit has no effect on the direction of Exxon i.e., Exxon and Unit go up and down completely randomly.

Pair Corralation between Exxon and Unit

Considering the 90-day investment horizon Exxon is expected to generate 3.86 times less return on investment than Unit. But when comparing it to its historical volatility, Exxon Mobil Corp is 10.29 times less risky than Unit. It trades about 0.14 of its potential returns per unit of risk. Unit Corporation is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  40.00  in Unit Corporation on December 27, 2024 and sell it today you would lose (3.00) from holding Unit Corporation or give up 7.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

Exxon Mobil Corp  vs.  Unit Corp.

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.

Unit

Risk-Adjusted Performance

Insignificant

Over the last 90 days Unit Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly unsteady fundamental indicators, Unit showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exxon and Unit

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

The idea behind Exxon Mobil Corp and Unit Corporation 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.