Correlation Between Phillips and Hospital Mater

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

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

Diversification Opportunities for Phillips and Hospital Mater

0.16

Correlation Coefficient

Phillips  Hospital Mater

Average diversification

The 3 months correlation between Phillips and Hospital is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Hospital Mater Dei in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hospital Mater Dei 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 Hospital Mater. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hospital Mater Dei has no effect on the direction of Phillips i.e., Phillips and Hospital Mater go up and down completely randomly.

Pair Corralation between Phillips and Hospital Mater

Assuming the 90 days trading horizon Phillips 66 is expected to generate 1.04 times more return on investment than Hospital Mater. However, Phillips is 1.04 times more volatile than Hospital Mater Dei. It trades about 0.04 of its potential returns per unit of risk. Hospital Mater Dei is currently generating about -0.04 per unit of risk. If you would invest  26,340  in Phillips 66 on October 4, 2024 and sell it today you would earn a total of  7,728  from holding Phillips 66 or generate 29.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	66.2%
Values	Daily Returns

Phillips 66  vs.  Hospital Mater Dei

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.

Hospital Mater Dei

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hospital Mater Dei has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Phillips and Hospital Mater

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

The idea behind Phillips 66 and Hospital Mater Dei 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.