Correlation Between Diamondback Energy, and ConocoPhillips

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

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

Diversification Opportunities for Diamondback Energy, and ConocoPhillips

0.65

Correlation Coefficient

Diamondback Energy,  ConocoPhillips

Poor diversification

The 3 months correlation between Diamondback and ConocoPhillips is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Diamondback Energy, and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Diamondback Energy, 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 Diamondback Energy, are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Diamondback Energy, i.e., Diamondback Energy, and ConocoPhillips go up and down completely randomly.

Pair Corralation between Diamondback Energy, and ConocoPhillips

Assuming the 90 days trading horizon Diamondback Energy, is expected to under-perform the ConocoPhillips. But the stock apears to be less risky and, when comparing its historical volatility, Diamondback Energy, is 1.06 times less risky than ConocoPhillips. The stock trades about -0.11 of its potential returns per unit of risk. The ConocoPhillips is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  4,984  in ConocoPhillips on December 30, 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

Diamondback Energy,  vs.  ConocoPhillips

Diamondback Energy,

Risk-Adjusted Performance

Very Weak

Over the last 90 days Diamondback Energy, 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 basic 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.

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.

Pair Trading with Diamondback Energy, and ConocoPhillips

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

The idea behind Diamondback Energy, and ConocoPhillips 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 Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.