Correlation Between Hess and ConocoPhillips

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

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

Diversification Opportunities for Hess and ConocoPhillips

-0.23

Correlation Coefficient

Hess  ConocoPhillips

Very good diversification

The 3 months correlation between Hess and ConocoPhillips is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Hess Corp. and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Hess 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 Hess Corporation 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 Hess i.e., Hess and ConocoPhillips go up and down completely randomly.

Pair Corralation between Hess and ConocoPhillips

Assuming the 90 days trading horizon Hess Corporation is expected to generate 0.04 times more return on investment than ConocoPhillips. However, Hess Corporation is 22.99 times less risky than ConocoPhillips. It trades about 0.24 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.04 per unit of risk. If you would invest  37,818  in Hess Corporation on October 5, 2024 and sell it today you would earn a total of  106.00  from holding Hess Corporation or generate 0.28% return on investment over 90 days.

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

Hess Corp.  vs.  ConocoPhillips

Hess

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Hess is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with Hess and ConocoPhillips

The main advantage of trading using opposite Hess and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess 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 Hess Corporation 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.

Check out your portfolio center.

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 Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.