Correlation Between Exxon and Meta Platforms
Can any of the company-specific risk be diversified away by investing in both Exxon and Meta Platforms 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 Meta Platforms into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EXXON MOBIL CDR and Meta Platforms CDR, you can compare the effects of market volatilities on Exxon and Meta Platforms 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 Meta Platforms. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Meta Platforms.
Diversification Opportunities for Exxon and Meta Platforms
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Meta is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding EXXON MOBIL CDR and Meta Platforms CDR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meta Platforms CDR 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 CDR are associated (or correlated) with Meta Platforms. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meta Platforms CDR has no effect on the direction of Exxon i.e., Exxon and Meta Platforms go up and down completely randomly.
Pair Corralation between Exxon and Meta Platforms
Assuming the 90 days trading horizon Exxon is expected to generate 2.43 times less return on investment than Meta Platforms. But when comparing it to its historical volatility, EXXON MOBIL CDR is 1.1 times less risky than Meta Platforms. It trades about 0.05 of its potential returns per unit of risk. Meta Platforms CDR is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,877 in Meta Platforms CDR on August 28, 2024 and sell it today you would earn a total of 263.00 from holding Meta Platforms CDR or generate 9.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
EXXON MOBIL CDR vs. Meta Platforms CDR
Performance |
| Timeline |
| EXXON MOBIL CDR |
| Meta Platforms CDR |
Exxon and Meta Platforms Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Meta Platforms
The main advantage of trading using opposite Exxon and Meta Platforms positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Meta Platforms 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 Meta Platforms will offset losses from the drop in Meta Platforms' long position.The idea behind EXXON MOBIL CDR and Meta Platforms CDR 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.| 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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