Correlation Between ConocoPhillips and Petroreconcavo

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

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

Diversification Opportunities for ConocoPhillips and Petroreconcavo

0.16

Correlation Coefficient

ConocoPhillips  Petroreconcavo

Average diversification

The 3 months correlation between ConocoPhillips and Petroreconcavo is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Petroreconcavo SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroreconcavo SA 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 Petroreconcavo. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroreconcavo SA has no effect on the direction of ConocoPhillips i.e., ConocoPhillips and Petroreconcavo go up and down completely randomly.

Pair Corralation between ConocoPhillips and Petroreconcavo

Assuming the 90 days trading horizon ConocoPhillips is expected to under-perform the Petroreconcavo. But the stock apears to be less risky and, when comparing its historical volatility, ConocoPhillips is 1.1 times less risky than Petroreconcavo. The stock trades about -0.23 of its potential returns per unit of risk. The Petroreconcavo SA is currently generating about -0.11 of returns per unit of risk over similar time horizon. If you would invest  1,691  in Petroreconcavo SA on September 23, 2024 and sell it today you would lose (104.00) from holding Petroreconcavo SA or give up 6.15% of portfolio value over 90 days.

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

ConocoPhillips  vs.  Petroreconcavo SA

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.

Petroreconcavo SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petroreconcavo SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Petroreconcavo is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with ConocoPhillips and Petroreconcavo

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

The idea behind ConocoPhillips and Petroreconcavo SA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.