Correlation Between Exxon and Civitas Resources
Can any of the company-specific risk be diversified away by investing in both Exxon and Civitas Resources 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 Civitas Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil Corp and Civitas Resources, you can compare the effects of market volatilities on Exxon and Civitas Resources 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 Civitas Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Civitas Resources.
Diversification Opportunities for Exxon and Civitas Resources
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and Civitas is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Civitas Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civitas Resources 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 Corp are associated (or correlated) with Civitas Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civitas Resources has no effect on the direction of Exxon i.e., Exxon and Civitas Resources go up and down completely randomly.
Pair Corralation between Exxon and Civitas Resources
Considering the 90-day investment horizon Exxon Mobil Corp is expected to generate 0.11 times more return on investment than Civitas Resources. However, Exxon Mobil Corp is 8.72 times less risky than Civitas Resources. It trades about 0.04 of its potential returns per unit of risk. Civitas Resources is currently generating about -0.09 per unit of risk. If you would invest 11,626 in Exxon Mobil Corp on August 29, 2024 and sell it today you would earn a total of 206.50 from holding Exxon Mobil Corp or generate 1.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.67% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Civitas Resources
Performance |
| Timeline |
| Exxon Mobil Corp |
| Civitas Resources |
Exxon and Civitas Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Civitas Resources
The main advantage of trading using opposite Exxon and Civitas Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Civitas Resources 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 Civitas Resources will offset losses from the drop in Civitas Resources' long position.The idea behind Exxon Mobil Corp and Civitas Resources 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.| Civitas Resources vs. BCE Inc | Civitas Resources vs. PennantPark Floating Rate | Civitas Resources vs. Harmony Gold Mining | Civitas Resources vs. Stepstone Group |
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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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