Correlation Between ConocoPhillips and Invitation Homes

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

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

Diversification Opportunities for ConocoPhillips and Invitation Homes

0.29

Correlation Coefficient

ConocoPhillips  Invitation Homes

Modest diversification

The 3 months correlation between ConocoPhillips and Invitation is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Invitation Homes in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Invitation Homes 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 Invitation Homes. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Invitation Homes has no effect on the direction of ConocoPhillips i.e., ConocoPhillips and Invitation Homes go up and down completely randomly.

Pair Corralation between ConocoPhillips and Invitation Homes

Assuming the 90 days trading horizon ConocoPhillips is expected to generate 1.02 times less return on investment than Invitation Homes. In addition to that, ConocoPhillips is 1.62 times more volatile than Invitation Homes. It trades about 0.03 of its total potential returns per unit of risk. Invitation Homes is currently generating about 0.05 per unit of volatility. If you would invest  3,228  in Invitation Homes on October 10, 2024 and sell it today you would earn a total of  661.00  from holding Invitation Homes or generate 20.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	80.76%
Values	Daily Returns

ConocoPhillips  vs.  Invitation Homes

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.

Invitation Homes

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Invitation Homes has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Invitation Homes 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 Invitation Homes

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

The idea behind ConocoPhillips and Invitation Homes 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.