Correlation Between Transport International and Phillips

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

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

Diversification Opportunities for Transport International and Phillips

-0.26

Correlation Coefficient

Transport International  Phillips

Very good diversification

The 3 months correlation between Transport and Phillips is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Transport International Holdin and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and Transport International 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 Transport International Holdings 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 Transport International i.e., Transport International and Phillips go up and down completely randomly.

Pair Corralation between Transport International and Phillips

Assuming the 90 days horizon Transport International is expected to generate 120.5 times less return on investment than Phillips. In addition to that, Transport International is 1.02 times more volatile than Phillips 66. It trades about 0.0 of its total potential returns per unit of risk. Phillips 66 is currently generating about 0.09 per unit of volatility. If you would invest  10,682  in Phillips 66 on December 28, 2024 and sell it today you would earn a total of  1,046  from holding Phillips 66 or generate 9.79% return on investment over 90 days.

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

Transport International Holdin  vs.  Phillips 66

Transport International

Risk-Adjusted Performance

Very Weak

Over the last 90 days Transport International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Transport International 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

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Phillips may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Transport International and Phillips

The main advantage of trading using opposite Transport International and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Transport International 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 Transport International Holdings 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.

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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.