Correlation Between Microsoft and Exxon
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Exxon into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Exxon Mobil Corp, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Exxon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Exxon.
Diversification Opportunities for Microsoft and Exxon
Very good diversification
The 3 months correlation between Microsoft and Exxon is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft 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 Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Exxon go up and down completely randomly.
Pair Corralation between Microsoft and Exxon
Given the investment horizon of 90 days Microsoft is expected to generate 1.08 times more return on investment than Exxon. However, Microsoft is 1.08 times more volatile than Exxon Mobil Corp. It trades about 0.16 of its potential returns per unit of risk. Exxon Mobil Corp is currently generating about 0.01 per unit of risk. If you would invest 38,799 in Microsoft on March 17, 2025 and sell it today you would earn a total of 8,697 from holding Microsoft or generate 22.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Microsoft vs. Exxon Mobil Corp
Performance |
| Timeline |
| Microsoft |
| Exxon Mobil Corp |
Microsoft and Exxon Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Exxon
The main advantage of trading using opposite Microsoft and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Adobe Systems Incorporated | Microsoft vs. Crowdstrike Holdings |
| Exxon vs. Shell PLC ADR | Exxon vs. BP PLC ADR | Exxon vs. Suncor Energy | Exxon vs. Petroleo Brasileiro Petrobras |
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 the Money Managers module to screen money managers from public funds and ETFs managed around the world.
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