Correlation Between Exxon and Microsoft
Can any of the company-specific risk be diversified away by investing in both Exxon and Microsoft 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 Microsoft 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 Microsoft, you can compare the effects of market volatilities on Exxon and Microsoft 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 Microsoft. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Microsoft.
Diversification Opportunities for Exxon and Microsoft
Very weak diversification
The 3 months correlation between Exxon and Microsoft is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil Corp and Microsoft in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Microsoft 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 Microsoft. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Microsoft has no effect on the direction of Exxon i.e., Exxon and Microsoft go up and down completely randomly.
Pair Corralation between Exxon and Microsoft
Considering the 90-day investment horizon Exxon is expected to generate 1.16 times less return on investment than Microsoft. In addition to that, Exxon is 1.36 times more volatile than Microsoft. It trades about 0.11 of its total potential returns per unit of risk. Microsoft is currently generating about 0.17 per unit of volatility. If you would invest 45,993 in Microsoft on May 27, 2025 and sell it today you would earn a total of 4,730 from holding Microsoft or generate 10.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Exxon Mobil Corp vs. Microsoft
Performance |
| Timeline |
| Exxon Mobil Corp |
| Microsoft |
Exxon and Microsoft Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Exxon and Microsoft
The main advantage of trading using opposite Exxon and Microsoft positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exxon position performs unexpectedly, Microsoft 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 Microsoft will offset losses from the drop in Microsoft's long position.| Exxon vs. Shell PLC ADR | Exxon vs. BP PLC ADR | Exxon vs. Suncor Energy | Exxon vs. Petroleo Brasileiro Petrobras |
| Microsoft vs. Palantir Technologies Class | Microsoft vs. Crowdstrike Holdings | Microsoft vs. Oracle | Microsoft vs. CoreWeave, Class A |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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