Correlation Between Exxon Mobil and Reliance Industries

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

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

Diversification Opportunities for Exxon Mobil and Reliance Industries

-0.43

Correlation Coefficient

Exxon Mobil  Reliance Industries

Very good diversification

The 3 months correlation between Exxon and Reliance is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Reliance Industries Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reliance Industries and Exxon Mobil 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 are associated (or correlated) with Reliance Industries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reliance Industries has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and Reliance Industries go up and down completely randomly.

Pair Corralation between Exxon Mobil and Reliance Industries

Assuming the 90 days trading horizon Exxon Mobil is expected to under-perform the Reliance Industries. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil is 1.32 times less risky than Reliance Industries. The stock trades about -0.48 of its potential returns per unit of risk. The Reliance Industries Limited is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  5,420  in Reliance Industries Limited on September 22, 2024 and sell it today you would earn a total of  40.00  from holding Reliance Industries Limited or generate 0.74% return on investment over 90 days.

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

Exxon Mobil  vs.  Reliance Industries Limited

Exxon Mobil

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Exxon Mobil has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Exxon Mobil is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Reliance Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Reliance Industries Limited has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Exxon Mobil and Reliance Industries

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

The idea behind Exxon Mobil and Reliance Industries Limited 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.