Correlation Between Chevron Corp and Exxon

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

0.87

Correlation Coefficient

Chevron Corp  Exxon

Very poor diversification

The 3 months correlation between Chevron and Exxon is 0.87. 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 under-perform the Exxon. In addition to that, Chevron Corp is 1.1 times more volatile than Exxon Mobil Corp. It trades about -0.05 of its total potential returns per unit of risk. Exxon Mobil Corp is currently generating about -0.01 per unit of volatility. If you would invest  10,899  in Exxon Mobil Corp on February 4, 2025 and sell it today you would lose (278.00) from holding Exxon Mobil Corp or give up 2.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Chevron Corp  vs.  Exxon Mobil Corp

Chevron Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Chevron Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Exxon Mobil Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Exxon Mobil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

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.

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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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.