Correlation Between Permian Resources and Exxon

Can any of the company-specific risk be diversified away by investing in both Permian Resources 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 Permian Resources and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Permian Resources and Exxon Mobil Corp, you can compare the effects of market volatilities on Permian Resources 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 Permian Resources with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Resources and Exxon.

Diversification Opportunities for Permian Resources and Exxon

0.8

Correlation Coefficient

Permian Resources  Exxon

Very poor diversification

The 3 months correlation between Permian and Exxon is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Permian Resources 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 Permian Resources 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 Permian Resources 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 Permian Resources i.e., Permian Resources and Exxon go up and down completely randomly.

Pair Corralation between Permian Resources and Exxon

Allowing for the 90-day total investment horizon Permian Resources is expected to generate 1.75 times more return on investment than Exxon. However, Permian Resources is 1.75 times more volatile than Exxon Mobil Corp. It trades about 0.14 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.12 per unit of risk. If you would invest  1,176  in Permian Resources on May 3, 2025 and sell it today you would earn a total of  240.00  from holding Permian Resources or generate 20.41% return on investment over 90 days.

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

Permian Resources  vs.  Exxon Mobil Corp

Permian Resources

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Permian Resources are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Permian Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Exxon Mobil Corp

Risk-Adjusted Performance

OK

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. In spite of very weak basic indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Permian Resources and Exxon

The main advantage of trading using opposite Permian Resources and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Resources 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 Permian Resources 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.