Correlation Between Exxon and Phillips

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

By analyzing existing cross correlation between Exxon Mobil Corp and Phillips 66, you can compare the effects of market volatilities on Exxon and Phillips 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 Exxon with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Phillips.

Diversification Opportunities for Exxon and Phillips

0.89

Correlation Coefficient

Exxon  Phillips

Very poor diversification

The 3 months correlation between Exxon and Phillips is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and Exxon 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 Exxon Mobil Corp are associated (or correlated) with Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Exxon i.e., Exxon and Phillips go up and down completely randomly.

Pair Corralation between Exxon and Phillips

Considering the 90-day investment horizon Exxon Mobil Corp is expected to under-perform the Phillips. But the stock apears to be less risky and, when comparing its historical volatility, Exxon Mobil Corp is 1.31 times less risky than Phillips. The stock trades about -0.1 of its potential returns per unit of risk. The Phillips 66 is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  13,304  in Phillips 66 on July 18, 2025 and sell it today you would lose (347.00) from holding Phillips 66 or give up 2.61% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

Exxon Mobil Corp  vs.  Phillips 66

Exxon Mobil Corp

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil Corp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Exxon is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Phillips 66

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Phillips is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Phillips

The main advantage of trading using opposite Exxon and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.

The idea behind Exxon Mobil Corp and Phillips 66 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.