Correlation Between Exxon and Essential Energy
Can any of the company-specific risk be diversified away by investing in both Exxon and Essential Energy 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 Essential Energy 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 Essential Energy Services, you can compare the effects of market volatilities on Exxon and Essential Energy 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 Essential Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Essential Energy.
Diversification Opportunities for Exxon and Essential Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Exxon and Essential is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Essential Energy Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Essential Energy Services 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 Essential Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Essential Energy Services has no effect on the direction of Exxon i.e., Exxon and Essential Energy go up and down completely randomly.
Pair Corralation between Exxon and Essential Energy
If you would invest 11,395 in Exxon Mobil Corp on September 3, 2024 and sell it today you would earn a total of 401.00 from holding Exxon Mobil Corp or generate 3.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 0.68% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Essential Energy Services
Performance |
| Timeline |
| Exxon Mobil Corp |
| Essential Energy Services |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Exxon and Essential Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Essential Energy
The main advantage of trading using opposite Exxon and Essential Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Essential Energy 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 Essential Energy will offset losses from the drop in Essential Energy's long position.The idea behind Exxon Mobil Corp and Essential Energy Services 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.| Essential Energy vs. Source Energy Services | Essential Energy vs. Total Energy Services | Essential Energy vs. Trican Well Service | Essential Energy vs. STEP Energy Services |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Cryptocurrency Center Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency | |
| Money Flow Index Determine momentum by analyzing Money Flow Index and other technical indicators | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon | |
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| Global Correlations Find global opportunities by holding instruments from different markets |