Correlation Between ConocoPhillips and Applied Materials,

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

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

Diversification Opportunities for ConocoPhillips and Applied Materials,

0.64

Correlation Coefficient

ConocoPhillips  Applied Materials,

Poor diversification

The 3 months correlation between ConocoPhillips and Applied is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Applied Materials, in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Applied Materials, and ConocoPhillips 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 ConocoPhillips are associated (or correlated) with Applied Materials,. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Applied Materials, has no effect on the direction of ConocoPhillips i.e., ConocoPhillips and Applied Materials, go up and down completely randomly.

Pair Corralation between ConocoPhillips and Applied Materials,

Assuming the 90 days trading horizon ConocoPhillips is expected to generate 0.85 times more return on investment than Applied Materials,. However, ConocoPhillips is 1.17 times less risky than Applied Materials,. It trades about -0.01 of its potential returns per unit of risk. Applied Materials, is currently generating about -0.09 per unit of risk. If you would invest  4,984  in ConocoPhillips on December 29, 2024 and sell it today you would lose (159.00) from holding ConocoPhillips or give up 3.19% of portfolio value over 90 days.

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

ConocoPhillips  vs.  Applied Materials,

ConocoPhillips

Risk-Adjusted Performance

Very Weak

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

Applied Materials,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Applied Materials, has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's primary indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with ConocoPhillips and Applied Materials,

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

The idea behind ConocoPhillips and Applied Materials, 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.