Correlation Between Fidelity National and Phillips

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

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

Diversification Opportunities for Fidelity National and Phillips

0.19

Correlation Coefficient

Fidelity National  Phillips

Average diversification

The 3 months correlation between Fidelity and Phillips is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity National Information and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and Fidelity National 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 Fidelity National Information 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 Fidelity National i.e., Fidelity National and Phillips go up and down completely randomly.

Pair Corralation between Fidelity National and Phillips

Assuming the 90 days trading horizon Fidelity National is expected to generate 1.18 times less return on investment than Phillips. But when comparing it to its historical volatility, Fidelity National Information is 1.57 times less risky than Phillips. It trades about 0.12 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  23,708  in Phillips 66 on October 4, 2024 and sell it today you would earn a total of  10,360  from holding Phillips 66 or generate 43.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	56.1%
Values	Daily Returns

Fidelity National Information  vs.  Phillips 66

Fidelity National

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity National Information are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fidelity National may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Phillips 66

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Fidelity National and Phillips

The main advantage of trading using opposite Fidelity National and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity National 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 Fidelity National Information 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.