Correlation Between Permian Resources and Exxon
Can any of the company-specific risk be diversified away by investing in both Permian Resources 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 Permian Resources and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Resources and Exxon Mobil Corp, you can compare the effects of market volatilities on Permian Resources 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 Permian Resources with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Exxon.
Diversification Opportunities for Permian Resources and Exxon
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Permian and Exxon is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Permian Resources 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 Permian Resources 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 Corp has no effect on the direction of Permian Resources i.e., Permian Resources and Exxon go up and down completely randomly.
Pair Corralation between Permian Resources and Exxon
Allowing for the 90-day total investment horizon Permian Resources is expected to under-perform the Exxon. In addition to that, Permian Resources is 1.32 times more volatile than Exxon Mobil Corp. It trades about -0.3 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.09 per unit of volatility. If you would invest 11,132 in Exxon Mobil Corp on November 18, 2024 and sell it today you would lose (308.00) from holding Exxon Mobil Corp or give up 2.77% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Resources vs. Exxon Mobil Corp
Performance |
| Timeline |
| Permian Resources |
| Exxon Mobil Corp |
Permian Resources and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Resources and Exxon
The main advantage of trading using opposite Permian Resources and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources 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.| Permian Resources vs. Devon Energy | Permian Resources vs. EOG Resources | Permian Resources vs. Coterra Energy | Permian Resources vs. Range Resources Corp |
| Exxon vs. TotalEnergies SE ADR | Exxon vs. Equinor ASA ADR | Exxon vs. Petrleo Brasileiro SA | Exxon vs. Ecopetrol SA ADR |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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