strategy: Cointegration, Correlation and
Trading pairs Xom vs BP which has moved from its correlation can be done based on cointegration or analyzing the prices of the stock pairs and tries to profit from the mean-reversion proces.
Cointegration (right chart): The trader should look for the divergence pairs that have moved away from each other and and then back together in a regular pattern.
Exxon move together very closely and has a maximal correlation with BP . This means it's profitable when the relative value between the two assets is perturbed from equilibrium, you can take a contrarian position and
profit from the spread trading as the prices revert back to their long-run mean.