Correlation Between Exxon Mobil and BP Plc
Can any of the company-specific risk be diversified away by investing in both Exxon Mobil and BP Plc 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 Mobil and BP Plc into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Exxon Mobil and BP plc, you can compare the effects of market volatilities on Exxon Mobil and BP Plc 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 Mobil with a short position of BP Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon Mobil and BP Plc.
Diversification Opportunities for Exxon Mobil and BP Plc
-0.22 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Exxon and BSU is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and BP plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP plc and Exxon Mobil 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 are associated (or correlated) with BP Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP plc has no effect on the direction of Exxon Mobil i.e., Exxon Mobil and BP Plc go up and down completely randomly.
Pair Corralation between Exxon Mobil and BP Plc
Assuming the 90 days trading horizon Exxon Mobil is expected to generate 0.97 times more return on investment than BP Plc. However, Exxon Mobil is 1.03 times less risky than BP Plc. It trades about 0.03 of its potential returns per unit of risk. BP plc is currently generating about 0.0 per unit of risk. If you would invest 9,400 in Exxon Mobil on September 3, 2024 and sell it today you would earn a total of 1,772 from holding Exxon Mobil or generate 18.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil vs. BP plc
Performance |
| Timeline |
| Exxon Mobil |
| BP plc |
Exxon Mobil and BP Plc Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon Mobil and BP Plc
The main advantage of trading using opposite Exxon Mobil and BP Plc positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon Mobil position performs unexpectedly, BP Plc 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 BP Plc will offset losses from the drop in BP Plc's long position.| Exxon Mobil vs. VIAPLAY GROUP AB | Exxon Mobil vs. Spirent Communications plc | Exxon Mobil vs. TRAVEL LEISURE DL 01 | Exxon Mobil vs. Consolidated Communications Holdings |
| BP Plc vs. ECHO INVESTMENT ZY | BP Plc vs. EAT WELL INVESTMENT | BP Plc vs. Playa Hotels Resorts | BP Plc vs. DIVERSIFIED ROYALTY |
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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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