Correlation Between Apple and Exxon
Can any of the company-specific risk be diversified away by investing in both Apple and Exxon 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 Apple and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc CDR and EXXON MOBIL CDR, you can compare the effects of market volatilities on Apple and Exxon 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 Apple with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Exxon.
Diversification Opportunities for Apple and Exxon
Very weak diversification
The 3 months correlation between Apple and Exxon is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc CDR and EXXON MOBIL CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EXXON MOBIL CDR and Apple 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 Apple Inc CDR are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EXXON MOBIL CDR has no effect on the direction of Apple i.e., Apple and Exxon go up and down completely randomly.
Pair Corralation between Apple and Exxon
Assuming the 90 days trading horizon Apple is expected to generate 1.46 times less return on investment than Exxon. But when comparing it to its historical volatility, Apple Inc CDR is 3.61 times less risky than Exxon. It trades about 0.06 of its potential returns per unit of risk. EXXON MOBIL CDR is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 2,101 in EXXON MOBIL CDR on August 24, 2024 and sell it today you would earn a total of 182.00 from holding EXXON MOBIL CDR or generate 8.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.76% |
| Values | Daily Returns |
Apple Inc CDR vs. EXXON MOBIL CDR
Performance |
| Timeline |
| Apple Inc CDR |
| EXXON MOBIL CDR |
Apple and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Exxon
The main advantage of trading using opposite Apple and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.| Apple vs. Primaris Retail RE | Apple vs. Arbor Metals Corp | Apple vs. Gfl Environmental Holdings | Apple vs. Information Services |
| Exxon vs. Trican Well Service | Exxon vs. Ensign Energy Services | Exxon vs. Calfrac Well Services | Exxon vs. Birchcliff Energy |
Check out your portfolio center.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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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