Correlation Between PSI Software and Phillips

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

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

Diversification Opportunities for PSI Software and Phillips

0.27

Correlation Coefficient

PSI Software  Phillips

Modest diversification

The 3 months correlation between PSI and Phillips is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding PSI Software AG and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and PSI Software 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 PSI Software AG are associated (or correlated) with Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of PSI Software i.e., PSI Software and Phillips go up and down completely randomly.

Pair Corralation between PSI Software and Phillips

Assuming the 90 days trading horizon PSI Software AG is expected to under-perform the Phillips. In addition to that, PSI Software is 1.28 times more volatile than Phillips 66. It trades about 0.0 of its total potential returns per unit of risk. Phillips 66 is currently generating about 0.03 per unit of volatility. If you would invest  8,775  in Phillips 66 on October 4, 2024 and sell it today you would earn a total of  2,003  from holding Phillips 66 or generate 22.83% return on investment over 90 days.

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

PSI Software AG  vs.  Phillips 66

PSI Software AG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PSI Software AG has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, PSI Software is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

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 fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with PSI Software and Phillips

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

The idea behind PSI Software AG and Phillips 66 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 Transaction History module to view history of all your transactions and understand their impact on performance.