Correlation Between Phillips and Bread Financial

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

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

Diversification Opportunities for Phillips and Bread Financial

0.17

Correlation Coefficient

Phillips  Bread Financial

Average diversification

The 3 months correlation between Phillips and Bread is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Bread Financial Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bread Financial Holdings and Phillips 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 Phillips 66 are associated (or correlated) with Bread Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bread Financial Holdings has no effect on the direction of Phillips i.e., Phillips and Bread Financial go up and down completely randomly.

Pair Corralation between Phillips and Bread Financial

Assuming the 90 days trading horizon Phillips 66 is expected to under-perform the Bread Financial. In addition to that, Phillips is 1.07 times more volatile than Bread Financial Holdings. It trades about -0.53 of its total potential returns per unit of risk. Bread Financial Holdings is currently generating about 0.04 per unit of volatility. If you would invest  9,346  in Bread Financial Holdings on October 4, 2024 and sell it today you would earn a total of  83.00  from holding Bread Financial Holdings or generate 0.89% return on investment over 90 days.

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

Phillips 66  vs.  Bread Financial Holdings

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.

Bread Financial Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bread Financial Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak essential indicators, Bread Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Phillips and Bread Financial

The main advantage of trading using opposite Phillips and Bread Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, Bread Financial 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 Bread Financial will offset losses from the drop in Bread Financial's long position.

The idea behind Phillips 66 and Bread Financial Holdings 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.