Correlation Between Ford and Exxon

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

Diversification Opportunities for Ford and Exxon

-0.44
  Correlation Coefficient

Very good diversification

The 3 months correlation between Ford and Exxon is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor 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 Ford 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 Ford Motor 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 Ford i.e., Ford and Exxon go up and down completely randomly.

Pair Corralation between Ford and Exxon

Taking into account the 90-day investment horizon Ford Motor is expected to under-perform the Exxon. But the stock apears to be less risky and, when comparing its historical volatility, Ford Motor is 1.03 times less risky than Exxon. The stock trades about -0.25 of its potential returns per unit of risk. The Exxon Mobil Corp is currently generating about -0.17 of returns per unit of risk over similar time horizon. If you would invest  9,909  in Exxon Mobil Corp on April 4, 2022 and sell it today you would lose (1,154)  from holding Exxon Mobil Corp or give up 11.65% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Ford Motor  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
Ford Motor 
Ford Performance
0 of 100
Over the last 90 days Ford Motor has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in August 2022. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0353
Payout Ratio
0.23
Last Split Factor
1748175:10
Forward Annual Dividend Rate
0.4
Dividend Date
2022-06-01
Ex Dividend Date
2022-04-25
Last Split Date
2000-08-03

Ford Price Channel

Exxon Mobil Corp 
Exxon Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in August 2022.

Structure and Payout Changes

Forward Annual Dividend Yield
0.0402
Payout Ratio
0.52
Last Split Factor
2:1
Forward Annual Dividend Rate
3.52
Dividend Date
2022-06-10
Ex Dividend Date
2022-05-12
Last Split Date
2001-07-19

Exxon Price Channel

Ford and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Ford and Exxon

The main advantage of trading using opposite Ford and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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.
The idea behind Ford Motor 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.
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 Shere Portfolio module to track or share privately all of your investments from the convenience of any device.

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