Correlation Between General Electric and Exxon

Specify exactly 2 symbols:
Can any of the company-specific risk be diversified away by investing in both General Electric 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 General Electric and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between General Electric and Exxon Mobil Corp, you can compare the effects of market volatilities on General Electric 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 General Electric with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of General Electric and Exxon.

Diversification Opportunities for General Electric and Exxon

0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between General and Exxon is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding General Electric 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 General Electric 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 General Electric 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 General Electric i.e., General Electric and Exxon go up and down completely randomly.

Pair Corralation between General Electric and Exxon

Allowing for the 90-day total investment horizon General Electric is expected to under-perform the Exxon. But the stock apears to be less risky and, when comparing its historical volatility, General Electric is 1.02 times less risky than Exxon. The stock trades about -0.08 of its potential returns per unit of risk. The Exxon Mobil Corp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  7,745  in Exxon Mobil Corp on May 11, 2022 and sell it today you would earn a total of  1,150  from holding Exxon Mobil Corp or generate 14.85% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

General Electric  vs.  Exxon Mobil Corp

 Performance (%) 
       Timeline  
General Electric 
General Performance
3 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in General Electric are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, General Electric is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

General Price Channel

Exxon Mobil Corp 
Exxon Performance
2 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively steady basic indicators, Exxon is not utilizing all of its potentials. The latest stock price chaos, may contribute to medium-term losses for the stakeholders.

Exxon Price Channel

General Electric and Exxon Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with General Electric and Exxon

The main advantage of trading using opposite General Electric and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if General Electric 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 General Electric 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 CEO Directory module to screen CEOs from public companies around the world.

Other Complementary Tools

Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Cryptocurrency Center
Build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency
Go
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Correlation Analysis
Reduce portfolio risk simply by holding instruments which are not perfectly correlated
Go
Portfolio Center
All portfolio management and optimization tools to improve performance of your portfolios
Go
Balance Of Power
Check stock momentum by analyzing Balance Of Power indicator and other technical ratios
Go
Portfolio Diagnostics
Use generated alerts and portfolio events aggregator to diagnose current holdings
Go
Portfolio Anywhere
Track or share privately all of your investments from the convenience of any device
Go
Equity Search
Search for actively traded equities including funds and ETFs from over 30 global markets
Go