Correlation Between ConocoPhillips and Hess

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

By analyzing existing cross correlation between ConocoPhillips and Hess Corporation, you can compare the effects of market volatilities on ConocoPhillips and Hess 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 Hess. Check out your portfolio center. Please also check ongoing floating volatility patterns of ConocoPhillips and Hess.

Diversification Opportunities for ConocoPhillips and Hess

-0.23

Correlation Coefficient

ConocoPhillips  Hess

Very good diversification

The 3 months correlation between ConocoPhillips and Hess is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Hess Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess 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 Hess. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess has no effect on the direction of ConocoPhillips i.e., ConocoPhillips and Hess go up and down completely randomly.

Pair Corralation between ConocoPhillips and Hess

Assuming the 90 days trading horizon ConocoPhillips is expected to generate 1.48 times more return on investment than Hess. However, ConocoPhillips is 1.48 times more volatile than Hess Corporation. It trades about 0.04 of its potential returns per unit of risk. Hess Corporation is currently generating about 0.0 per unit of risk. If you would invest  4,037  in ConocoPhillips on October 5, 2024 and sell it today you would earn a total of  1,094  from holding ConocoPhillips or generate 27.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.9%
Values	Daily Returns

ConocoPhillips  vs.  Hess Corp.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

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.

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with ConocoPhillips and Hess

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

The idea behind ConocoPhillips and Hess Corporation 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 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.