Correlation Between Phillips and Fresenius Medical

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

By analyzing existing cross correlation between Phillips 66 and Fresenius Medical Care, you can compare the effects of market volatilities on Phillips and Fresenius Medical 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 Fresenius Medical. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Fresenius Medical.

Diversification Opportunities for Phillips and Fresenius Medical

-0.08

Correlation Coefficient

Phillips  Fresenius Medical

Good diversification

The 3 months correlation between Phillips and Fresenius is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Fresenius Medical Care in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fresenius Medical Care 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 Fresenius Medical. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fresenius Medical Care has no effect on the direction of Phillips i.e., Phillips and Fresenius Medical go up and down completely randomly.

Pair Corralation between Phillips and Fresenius Medical

Assuming the 90 days trading horizon Phillips 66 is expected to generate 0.92 times more return on investment than Fresenius Medical. However, Phillips 66 is 1.09 times less risky than Fresenius Medical. It trades about 0.09 of its potential returns per unit of risk. Fresenius Medical Care is currently generating about 0.02 per unit of risk. If you would invest  23,708  in Phillips 66 on October 4, 2024 and sell it today you would earn a total of  10,360  from holding Phillips 66 or generate 43.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	56.1%
Values	Daily Returns

Phillips 66  vs.  Fresenius Medical Care

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.

Fresenius Medical Care

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fresenius Medical Care has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Fresenius Medical is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Phillips and Fresenius Medical

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

The idea behind Phillips 66 and Fresenius Medical Care 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.