Correlation Between Exxon and ALPHABET

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

Diversification Opportunities for Exxon and ALPHABET

0.75

Correlation Coefficient

Exxon  ALPHABET

Poor diversification

The 3 months correlation between Exxon and ALPHABET is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and ALPHABET INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ALPHABET INC 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 ALPHABET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ALPHABET INC has no effect on the direction of Exxon i.e., Exxon and ALPHABET go up and down completely randomly.

Pair Corralation between Exxon and ALPHABET

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.7 times more return on investment than ALPHABET. However, Exxon Mobil Corp is 1.43 times less risky than ALPHABET. It trades about -0.07 of its potential returns per unit of risk. ALPHABET INC is currently generating about -0.14 per unit of risk. If you would invest  11,681  in Exxon Mobil Corp on December 1, 2024 and sell it today you would lose (666.00) from holding Exxon Mobil Corp or give up 5.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Exxon Mobil Corp  vs.  ALPHABET INC

Exxon Mobil Corp

Risk-Adjusted Performance

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 very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

ALPHABET INC

Risk-Adjusted Performance

Very Weak

Over the last 90 days ALPHABET INC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for ALPHABET INC investors.

Pair Trading with Exxon and ALPHABET

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

The idea behind Exxon Mobil Corp and ALPHABET INC 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.