Correlation Between Phillips and NESTE OYJ

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

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

Diversification Opportunities for Phillips and NESTE OYJ

0.2

Correlation Coefficient

Phillips  NESTE OYJ

Modest diversification

The 3 months correlation between Phillips and NESTE is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and NESTE OYJ UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NESTE OYJ UNSPADR 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 NESTE OYJ. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NESTE OYJ UNSPADR has no effect on the direction of Phillips i.e., Phillips and NESTE OYJ go up and down completely randomly.

Pair Corralation between Phillips and NESTE OYJ

Assuming the 90 days horizon Phillips 66 is expected to generate 0.6 times more return on investment than NESTE OYJ. However, Phillips 66 is 1.67 times less risky than NESTE OYJ. It trades about -0.07 of its potential returns per unit of risk. NESTE OYJ UNSPADR is currently generating about -0.07 per unit of risk. If you would invest  12,668  in Phillips 66 on September 22, 2024 and sell it today you would lose (2,128) from holding Phillips 66 or give up 16.8% of portfolio value over 90 days.

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

Phillips 66  vs.  NESTE OYJ UNSPADR

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

NESTE OYJ UNSPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NESTE OYJ UNSPADR 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 technical and fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Phillips and NESTE OYJ

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

The idea behind Phillips 66 and NESTE OYJ UNSPADR 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.