Correlation Between Pioneer Natural and ConocoPhillips

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

By analyzing existing cross correlation between Pioneer Natural Resources and ConocoPhillips, you can compare the effects of market volatilities on Pioneer Natural and ConocoPhillips 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 Pioneer Natural with a short position of ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pioneer Natural and ConocoPhillips.

Diversification Opportunities for Pioneer Natural and ConocoPhillips

0.57

Correlation Coefficient

Pioneer Natural  ConocoPhillips

Very weak diversification

The 3 months correlation between Pioneer and ConocoPhillips is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Natural Resources and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Pioneer Natural 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 Pioneer Natural Resources are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Pioneer Natural i.e., Pioneer Natural and ConocoPhillips go up and down completely randomly.

Pair Corralation between Pioneer Natural and ConocoPhillips

Assuming the 90 days horizon Pioneer Natural Resources is expected to under-perform the ConocoPhillips. In addition to that, Pioneer Natural is 3.28 times more volatile than ConocoPhillips. It trades about -0.18 of its total potential returns per unit of risk. ConocoPhillips is currently generating about -0.08 per unit of volatility. If you would invest  9,802  in ConocoPhillips on October 10, 2024 and sell it today you would lose (224.00) from holding ConocoPhillips or give up 2.29% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	88.89%
Values	Daily Returns

Pioneer Natural Resources  vs.  ConocoPhillips

Pioneer Natural Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Natural Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Pioneer Natural reported solid returns over the last few months and may actually be approaching a breakup point.

ConocoPhillips

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ConocoPhillips has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ConocoPhillips is not utilizing all of its potentials. The newest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Pioneer Natural and ConocoPhillips

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

The idea behind Pioneer Natural Resources and ConocoPhillips 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.