Correlation Between Delek Logistics and Phillips

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

By analyzing existing cross correlation between Delek Logistics Partners and Phillips 66, you can compare the effects of market volatilities on Delek Logistics and Phillips 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 Delek Logistics with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek Logistics and Phillips.

Diversification Opportunities for Delek Logistics and Phillips

0.36

Correlation Coefficient

Delek Logistics  Phillips

Weak diversification

The 3 months correlation between Delek and Phillips is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and Delek Logistics 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 Delek Logistics Partners are associated (or correlated) with Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Delek Logistics i.e., Delek Logistics and Phillips go up and down completely randomly.

Pair Corralation between Delek Logistics and Phillips

Considering the 90-day investment horizon Delek Logistics is expected to generate 1.11 times less return on investment than Phillips. But when comparing it to its historical volatility, Delek Logistics Partners is 1.33 times less risky than Phillips. It trades about 0.11 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  11,099  in Phillips 66 on December 28, 2024 and sell it today you would earn a total of  1,077  from holding Phillips 66 or generate 9.7% return on investment over 90 days.

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

Delek Logistics Partners  vs.  Phillips 66

Delek Logistics Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Logistics Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Delek Logistics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Phillips 66

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Phillips may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Delek Logistics and Phillips

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

The idea behind Delek Logistics Partners and Phillips 66 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.