Correlation Between EQUINOR ASA and Exxon

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

Diversification Opportunities for EQUINOR ASA and Exxon

0.46
  Correlation Coefficient

Very weak diversification

The 3 months correlation between EQUINOR and Exxon is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding EQUINOR ASA 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 EQUINOR ASA 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 EQUINOR ASA 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 EQUINOR ASA i.e., EQUINOR ASA and Exxon go up and down completely randomly.

Pair Corralation between EQUINOR ASA and Exxon

Assuming the 90 days horizon EQUINOR ASA is expected to generate 1.19 times more return on investment than Exxon. However, EQUINOR ASA is 1.19 times more volatile than Exxon Mobil Corp. It trades about 0.09 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.08 per unit of risk. If you would invest  1,165  in EQUINOR ASA on February 20, 2022 and sell it today you would earn a total of  2,224  from holding EQUINOR ASA or generate 190.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

EQUINOR ASA  vs.  Exxon Mobil Corp

 Performance (%) 
      Timeline 
EQUINOR ASA 
EQUINOR Performance
6 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in EQUINOR ASA are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sluggish technical indicators, EQUINOR ASA exhibited solid returns over the last few months and may actually be approaching a breakup point.

EQUINOR Price Channel

Exxon Mobil Corp 
Exxon Performance
10 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Exxon revealed solid returns over the last few months and may actually be approaching a breakup point.

Exxon Price Channel

EQUINOR ASA and Exxon Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with EQUINOR ASA and Exxon

The main advantage of trading using opposite EQUINOR ASA and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EQUINOR ASA 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.

EQUINOR ASA

Pair trading matchups for EQUINOR ASA

The idea behind EQUINOR ASA 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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