Correlation Between Timken and 718546AH7

Can any of the company-specific risk be diversified away by investing in both Timken and 718546AH7 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 Timken and 718546AH7 into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Timken Company and PHILLIPS 66 5875, you can compare the effects of market volatilities on Timken and 718546AH7 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 Timken with a short position of 718546AH7. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and 718546AH7.

Diversification Opportunities for Timken and 718546AH7

0.12

Correlation Coefficient

Timken  718546AH7

Average diversification

The 3 months correlation between Timken and 718546AH7 is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and PHILLIPS 66 5875 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PHILLIPS 66 5875 and Timken 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 Timken Company are associated (or correlated) with 718546AH7. 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 5875 has no effect on the direction of Timken i.e., Timken and 718546AH7 go up and down completely randomly.

Pair Corralation between Timken and 718546AH7

Considering the 90-day investment horizon Timken Company is expected to under-perform the 718546AH7. In addition to that, Timken is 2.19 times more volatile than PHILLIPS 66 5875. It trades about -0.03 of its total potential returns per unit of risk. PHILLIPS 66 5875 is currently generating about 0.04 per unit of volatility. If you would invest  10,678  in PHILLIPS 66 5875 on September 16, 2024 and sell it today you would earn a total of  232.00  from holding PHILLIPS 66 5875 or generate 2.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.77%
Values	Daily Returns

Timken Company  vs.  PHILLIPS 66 5875

Timken Company

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Timken Company has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable forward-looking signals, Timken is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

PHILLIPS 66 5875

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in PHILLIPS 66 5875 are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, 718546AH7 is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Timken and 718546AH7

The main advantage of trading using opposite Timken and 718546AH7 positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken position performs unexpectedly, 718546AH7 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 718546AH7 will offset losses from the drop in 718546AH7's long position.

The idea behind Timken Company and PHILLIPS 66 5875 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.