Correlation Between GEAR4MUSIC and Phillips

Can any of the company-specific risk be diversified away by investing in both GEAR4MUSIC 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 GEAR4MUSIC and Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between GEAR4MUSIC LS 10 and Phillips 66, you can compare the effects of market volatilities on GEAR4MUSIC 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 GEAR4MUSIC with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of GEAR4MUSIC and Phillips.

Diversification Opportunities for GEAR4MUSIC and Phillips

-0.27

Correlation Coefficient

GEAR4MUSIC  Phillips

Very good diversification

The 3 months correlation between GEAR4MUSIC and Phillips is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding GEAR4MUSIC LS 10 and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and GEAR4MUSIC 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 GEAR4MUSIC LS 10 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 GEAR4MUSIC i.e., GEAR4MUSIC and Phillips go up and down completely randomly.

Pair Corralation between GEAR4MUSIC and Phillips

Assuming the 90 days horizon GEAR4MUSIC LS 10 is expected to generate 1.88 times more return on investment than Phillips. However, GEAR4MUSIC is 1.88 times more volatile than Phillips 66. It trades about 0.05 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.03 per unit of risk. If you would invest  118.00  in GEAR4MUSIC LS 10 on September 24, 2024 and sell it today you would earn a total of  76.00  from holding GEAR4MUSIC LS 10 or generate 64.41% return on investment over 90 days.

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

GEAR4MUSIC LS 10  vs.  Phillips 66

GEAR4MUSIC LS 10

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GEAR4MUSIC LS 10 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, GEAR4MUSIC is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

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 fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with GEAR4MUSIC and Phillips

The main advantage of trading using opposite GEAR4MUSIC and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GEAR4MUSIC 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 GEAR4MUSIC LS 10 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.