Correlation Between Chevron and Exxon Mobil
Can any of the company-specific risk be diversified away by investing in both Chevron and Exxon Mobil 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 Chevron and Exxon Mobil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron and Exxon Mobil, you can compare the effects of market volatilities on Chevron and Exxon Mobil 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 Chevron with a short position of Exxon Mobil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron and Exxon Mobil.
Diversification Opportunities for Chevron and Exxon Mobil
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chevron and Exxon is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Chevron and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Chevron 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 Chevron are associated (or correlated) with Exxon Mobil. 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 has no effect on the direction of Chevron i.e., Chevron and Exxon Mobil go up and down completely randomly.
Pair Corralation between Chevron and Exxon Mobil
Assuming the 90 days trading horizon Chevron is expected to generate 0.82 times more return on investment than Exxon Mobil. However, Chevron is 1.22 times less risky than Exxon Mobil. It trades about 0.43 of its potential returns per unit of risk. Exxon Mobil is currently generating about 0.12 per unit of risk. If you would invest 13,513 in Chevron on September 1, 2024 and sell it today you would earn a total of 1,787 from holding Chevron or generate 13.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Chevron vs. Exxon Mobil
Performance |
| Timeline |
| Chevron |
| Exxon Mobil |
Chevron and Exxon Mobil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chevron and Exxon Mobil
The main advantage of trading using opposite Chevron and Exxon Mobil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron position performs unexpectedly, Exxon Mobil 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 Mobil will offset losses from the drop in Exxon Mobil's long position.| Chevron vs. Solstad Offshore ASA | Chevron vs. NorAm Drilling AS | Chevron vs. SIEM OFFSHORE NEW | Chevron vs. ASURE SOFTWARE |
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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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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