Correlation Between Phillips and Refinaria

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

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

Diversification Opportunities for Phillips and Refinaria

-0.26

Correlation Coefficient

Phillips  Refinaria

Very good diversification

The 3 months correlation between Phillips and Refinaria is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Refinaria de Petrleos in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Refinaria de Petrleos 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 Refinaria. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Refinaria de Petrleos has no effect on the direction of Phillips i.e., Phillips and Refinaria go up and down completely randomly.

Pair Corralation between Phillips and Refinaria

Assuming the 90 days trading horizon Phillips is expected to generate 1.37 times less return on investment than Refinaria. But when comparing it to its historical volatility, Phillips 66 is 1.14 times less risky than Refinaria. It trades about 0.04 of its potential returns per unit of risk. Refinaria de Petrleos is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  161.00  in Refinaria de Petrleos on September 29, 2024 and sell it today you would earn a total of  95.00  from holding Refinaria de Petrleos or generate 59.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	66.53%
Values	Daily Returns

Phillips 66  vs.  Refinaria de Petrleos

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 somewhat strong basic indicators, Phillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Refinaria de Petrleos

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Refinaria de Petrleos has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with Phillips and Refinaria

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

The idea behind Phillips 66 and Refinaria de Petrleos 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.