Correlation Between Exxon and PetIQ

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

Diversification Opportunities for Exxon and PetIQ

0.58

Correlation Coefficient

Exxon  PetIQ

Very weak diversification

The 3 months correlation between Exxon and PetIQ is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and PetIQ Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PetIQ 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 PetIQ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PetIQ Inc has no effect on the direction of Exxon i.e., Exxon and PetIQ go up and down completely randomly.

Pair Corralation between Exxon and PetIQ

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 17.0 times more return on investment than PetIQ. However, Exxon is 17.0 times more volatile than PetIQ Inc. It trades about 0.03 of its potential returns per unit of risk. PetIQ Inc is currently generating about 0.43 per unit of risk. If you would invest  11,024  in Exxon Mobil Corp on September 13, 2024 and sell it today you would earn a total of  168.00  from holding Exxon Mobil Corp or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	49.21%
Values	Daily Returns

Exxon Mobil Corp  vs.  PetIQ Inc

Exxon Mobil Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

PetIQ Inc

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days PetIQ Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PetIQ is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Exxon and PetIQ

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

The idea behind Exxon Mobil Corp and PetIQ 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.