Correlation Between Phillips and Par Pacific

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

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

Diversification Opportunities for Phillips and Par Pacific

0.55

Correlation Coefficient

Phillips  Par Pacific

Very weak diversification

The 3 months correlation between Phillips and Par is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Par Pacific Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Par Pacific Holdings 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 Par Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Par Pacific Holdings has no effect on the direction of Phillips i.e., Phillips and Par Pacific go up and down completely randomly.

Pair Corralation between Phillips and Par Pacific

Considering the 90-day investment horizon Phillips 66 is expected to generate 0.49 times more return on investment than Par Pacific. However, Phillips 66 is 2.03 times less risky than Par Pacific. It trades about 0.01 of its potential returns per unit of risk. Par Pacific Holdings is currently generating about -0.1 per unit of risk. If you would invest  13,381  in Phillips 66 on September 2, 2024 and sell it today you would earn a total of  17.00  from holding Phillips 66 or generate 0.13% return on investment over 90 days.

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

Phillips 66  vs.  Par Pacific Holdings

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

Par Pacific Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Phillips and Par Pacific

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

The idea behind Phillips 66 and Par Pacific Holdings 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.