Correlation Between Quaker Chemical and ConocoPhillips

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

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

Diversification Opportunities for Quaker Chemical and ConocoPhillips

0.63

Correlation Coefficient

Quaker Chemical  ConocoPhillips

Poor diversification

The 3 months correlation between Quaker and ConocoPhillips is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Quaker Chemical and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Quaker Chemical 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 Quaker Chemical 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 Quaker Chemical i.e., Quaker Chemical and ConocoPhillips go up and down completely randomly.

Pair Corralation between Quaker Chemical and ConocoPhillips

Assuming the 90 days horizon Quaker Chemical is expected to generate 1.04 times more return on investment than ConocoPhillips. However, Quaker Chemical is 1.04 times more volatile than ConocoPhillips. It trades about -0.23 of its potential returns per unit of risk. ConocoPhillips is currently generating about -0.44 per unit of risk. If you would invest  15,700  in Quaker Chemical on September 20, 2024 and sell it today you would lose (1,200) from holding Quaker Chemical or give up 7.64% of portfolio value over 90 days.

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

Quaker Chemical  vs.  ConocoPhillips

Quaker Chemical

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Quaker Chemical and ConocoPhillips

The main advantage of trading using opposite Quaker Chemical and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Quaker Chemical 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 Quaker Chemical 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.