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

0.45

Correlation Coefficient

Hess  ConocoPhillips

Very weak diversification

The 3 months correlation between Hess and ConocoPhillips is 0.45. 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

Considering the 90-day investment horizon Hess Corporation is expected to generate 0.83 times more return on investment than ConocoPhillips. However, Hess Corporation is 1.2 times less risky than ConocoPhillips. It trades about 0.22 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.06 per unit of risk. If you would invest  13,027  in Hess Corporation on December 30, 2024 and sell it today you would earn a total of  2,818  from holding Hess Corporation or generate 21.63% return on investment over 90 days.

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

Hess Corp.  vs.  ConocoPhillips

Hess

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Corporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical and fundamental indicators, Hess unveiled solid returns over the last few months and may actually be approaching a breakup point.

ConocoPhillips

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in April 2025.

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.

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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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.