Correlation Between Exxon and APPLE

Can any of the company-specific risk be diversified away by investing in both Exxon and APPLE 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 APPLE 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 APPLE INC 385, you can compare the effects of market volatilities on Exxon and APPLE 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 APPLE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and APPLE.

Diversification Opportunities for Exxon and APPLE

-0.65

Correlation Coefficient

Exxon  APPLE

Excellent diversification

The 3 months correlation between Exxon and APPLE is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and APPLE INC 385 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on APPLE INC 385 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 APPLE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of APPLE INC 385 has no effect on the direction of Exxon i.e., Exxon and APPLE go up and down completely randomly.

Pair Corralation between Exxon and APPLE

Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.97 times more return on investment than APPLE. However, Exxon Mobil Corp is 1.03 times less risky than APPLE. It trades about 0.04 of its potential returns per unit of risk. APPLE INC 385 is currently generating about -0.02 per unit of risk. If you would invest  11,453  in Exxon Mobil Corp on September 2, 2024 and sell it today you would earn a total of  343.00  from holding Exxon Mobil Corp or generate 2.99% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.44%
Values	Daily Returns

Exxon Mobil Corp  vs.  APPLE INC 385

Exxon Mobil Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) 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 latest stock price disarray, may contribute to short-term losses for the investors.

APPLE INC 385

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days APPLE INC 385 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, APPLE is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and APPLE

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

The idea behind Exxon Mobil Corp and APPLE INC 385 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.