Correlation Between Meta Platforms and Exxon
Can any of the company-specific risk be diversified away by investing in both Meta Platforms 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 Meta Platforms and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Meta Platforms CDR and EXXON MOBIL CDR, you can compare the effects of market volatilities on Meta Platforms 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 Meta Platforms with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Meta Platforms and Exxon.
Diversification Opportunities for Meta Platforms and Exxon
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Meta and Exxon is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Meta Platforms 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 Meta Platforms 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 Meta Platforms 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 Meta Platforms i.e., Meta Platforms and Exxon go up and down completely randomly.
Pair Corralation between Meta Platforms and Exxon
Assuming the 90 days trading horizon Meta Platforms CDR is expected to under-perform the Exxon. In addition to that, Meta Platforms is 1.47 times more volatile than EXXON MOBIL CDR. It trades about -0.06 of its total potential returns per unit of risk. EXXON MOBIL CDR is currently generating about 0.06 per unit of volatility. If you would invest 2,213 in EXXON MOBIL CDR on August 28, 2024 and sell it today you would earn a total of 32.00 from holding EXXON MOBIL CDR or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Meta Platforms CDR vs. EXXON MOBIL CDR
Performance |
| Timeline |
| Meta Platforms CDR |
| EXXON MOBIL CDR |
Meta Platforms and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Meta Platforms and Exxon
The main advantage of trading using opposite Meta Platforms and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Meta Platforms 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.| Meta Platforms vs. Data Communications Management | Meta Platforms vs. Nova Leap Health | Meta Platforms vs. Bausch Health Companies | Meta Platforms vs. Doman Building Materials |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Other Complementary Tools
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
| Funds Screener Find actively-traded funds from around the world traded on over 30 global exchanges | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Fundamentals Comparison Compare fundamentals across multiple equities to find investing opportunities |