Correlation Between Chevron Corp and Exxon

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Can any of the company-specific risk be diversified away by investing in both Chevron Corp and Exxon 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 Chevron Corp and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chevron Corp and Exxon Mobil Corp, you can compare the effects of market volatilities on Chevron Corp and Exxon 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 Chevron Corp with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chevron Corp and Exxon.

Diversification Opportunities for Chevron Corp and Exxon

0.99
  Correlation Coefficient

No risk reduction

The 3 months correlation between Chevron and Exxon is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Chevron Corp and Exxon Mobil Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil Corp and Chevron Corp 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 Chevron Corp are associated (or correlated) with Exxon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exxon Mobil Corp has no effect on the direction of Chevron Corp i.e., Chevron Corp and Exxon go up and down completely randomly.

Pair Corralation between Chevron Corp and Exxon

Considering the 90-day investment horizon Chevron Corp is expected to generate 1.35 times less return on investment than Exxon. But when comparing it to its historical volatility, Chevron Corp is 1.12 times less risky than Exxon. It trades about 0.09 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  3,877  in Exxon Mobil Corp on August 31, 2022 and sell it today you would earn a total of  7,104  from holding Exxon Mobil Corp or generate 183.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Strong
Accuracy100.0%
ValuesDaily Returns

Chevron Corp  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
Chevron Corp 
Chevron Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Chevron Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Chevron Corp showed solid returns over the last few months and may actually be approaching a breakup point.

Chevron Price Channel

Exxon Mobil Corp 
Exxon Performance
9 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

Chevron Corp and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Chevron Corp and Exxon

The main advantage of trading using opposite Chevron Corp and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chevron Corp position performs unexpectedly, Exxon 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 Exxon will offset losses from the drop in Exxon's long position.
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Chevron Corp vs. Devon Energy Corp
The idea behind Chevron Corp and Exxon Mobil Corp 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.
Exxon vs. Apa Corp
Exxon vs. Chesapeake Energy Corp
Exxon vs. ConocoPhillips
Exxon vs. Devon Energy Corp
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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