Correlation Between Exxon and Procter Gamble

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

By analyzing existing cross correlation between Exxon Mobil and Procter Gamble DRC, you can compare the effects of market volatilities on Exxon and Procter Gamble 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 Procter Gamble. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exxon and Procter Gamble.

Diversification Opportunities for Exxon and Procter Gamble

0.41

Correlation Coefficient

Exxon  Procter Gamble

Very weak diversification

The 3 months correlation between Exxon and Procter is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Exxon Mobil and Procter Gamble DRC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Procter Gamble DRC 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 are associated (or correlated) with Procter Gamble. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Procter Gamble DRC has no effect on the direction of Exxon i.e., Exxon and Procter Gamble go up and down completely randomly.

Pair Corralation between Exxon and Procter Gamble

Assuming the 90 days trading horizon Exxon Mobil is expected to generate 1.04 times more return on investment than Procter Gamble. However, Exxon is 1.04 times more volatile than Procter Gamble DRC. It trades about 0.13 of its potential returns per unit of risk. Procter Gamble DRC is currently generating about 0.05 per unit of risk. If you would invest  1,250,000  in Exxon Mobil on April 22, 2025 and sell it today you would earn a total of  145,000  from holding Exxon Mobil or generate 11.6% return on investment over 90 days.

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

Exxon Mobil  vs.  Procter Gamble DRC

Exxon Mobil

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exxon Mobil are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak primary indicators, Exxon may actually be approaching a critical reversion point that can send shares even higher in August 2025.

Procter Gamble DRC

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Procter Gamble DRC are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, Procter Gamble is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Exxon and Procter Gamble

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

The idea behind Exxon Mobil and Procter Gamble DRC 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.