Correlation Between Exxon and PHX Energy

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

Diversification Opportunities for Exxon and PHX Energy

0.69

Correlation Coefficient

Exxon  PHX Energy

Poor diversification

The 3 months correlation between Exxon and PHX is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and PHX Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHX Energy Services 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 PHX Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PHX Energy Services has no effect on the direction of Exxon i.e., Exxon and PHX Energy go up and down completely randomly.

Pair Corralation between Exxon and PHX Energy

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the PHX Energy. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.91 times less risky than PHX Energy. The stock trades about -0.41 of its potential returns per unit of risk. The PHX Energy Services is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  695.00  in PHX Energy Services on September 17, 2024 and sell it today you would lose (26.00) from holding PHX Energy Services or give up 3.74% of portfolio value over 90 days.

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

Exxon Mobil Corp  vs.  PHX Energy Services

Exxon Mobil Corp

Risk-Adjusted Performance

0 of 100

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 recent stock price disarray, may contribute to short-term losses for the investors.

PHX Energy Services

Risk-Adjusted Performance

0 of 100

Weak

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

Pair Trading with Exxon and PHX Energy

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

The idea behind Exxon Mobil Corp and PHX Energy Services 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.