Correlation Between Exxon and Chevron Corp
Can any of the company-specific risk be diversified away by investing in both Exxon and Chevron Corp 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 Chevron Corp 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 Chevron Corp, you can compare the effects of market volatilities on Exxon and Chevron Corp 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 Chevron Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Chevron Corp.
Diversification Opportunities for Exxon and Chevron Corp
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Chevron is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Chevron Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Chevron Corp 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 Chevron Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Chevron Corp has no effect on the direction of Exxon i.e., Exxon and Chevron Corp go up and down completely randomly.
Pair Corralation between Exxon and Chevron Corp
Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Chevron Corp. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.04 times less risky than Chevron Corp. The stock trades about -0.09 of its potential returns per unit of risk. The Chevron Corp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest 15,970 in Chevron Corp on November 18, 2024 and sell it today you would lose (436.00) from holding Chevron Corp or give up 2.73% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Chevron Corp
Performance |
| Timeline |
| Exxon Mobil Corp |
| Chevron Corp |
Exxon and Chevron Corp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Chevron Corp
The main advantage of trading using opposite Exxon and Chevron Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Chevron Corp 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 Chevron Corp will offset losses from the drop in Chevron Corp's long position.| Exxon vs. TotalEnergies SE ADR | Exxon vs. Equinor ASA ADR | Exxon vs. Petrleo Brasileiro SA | Exxon vs. Ecopetrol SA ADR |
| Chevron Corp vs. TotalEnergies SE ADR | Chevron Corp vs. Equinor ASA ADR | Chevron Corp vs. Petrleo Brasileiro SA | Chevron Corp 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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