Correlation Between Repsol SA and Exxon

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

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

Diversification Opportunities for Repsol SA and Exxon

-0.32

Correlation Coefficient

Repsol SA  Exxon

Very good diversification

The 3 months correlation between Repsol and Exxon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Repsol SA and Exxon Mobil in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exxon Mobil and Repsol SA 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 Repsol SA 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 has no effect on the direction of Repsol SA i.e., Repsol SA and Exxon go up and down completely randomly.

Pair Corralation between Repsol SA and Exxon

Assuming the 90 days trading horizon Repsol SA is not expected to generate positive returns. However, Repsol SA is 111.75 times less risky than Exxon. It waists most of its returns potential to compensate for thr risk taken. Exxon is generating about 0.17 per unit of risk. If you would invest  1,190,000  in Exxon Mobil on April 20, 2025 and sell it today you would earn a total of  205,000  from holding Exxon Mobil or generate 17.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Repsol SA  vs.  Exxon Mobil

Repsol SA

Risk-Adjusted Performance

Very Weak

Over the last 90 days Repsol SA has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Repsol SA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Exxon Mobil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Exxon sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Repsol SA and Exxon

The main advantage of trading using opposite Repsol SA and Exxon positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Repsol SA 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 Repsol SA and Exxon Mobil 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 Global Correlations module to find global opportunities by holding instruments from different markets.