Correlation Between SLR Investment and Phillips

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

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

Diversification Opportunities for SLR Investment and Phillips

0.72

Correlation Coefficient

SLR Investment  Phillips

Poor diversification

The 3 months correlation between SLR and Phillips is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding SLR Investment Corp and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and SLR Investment 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 SLR Investment Corp 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 SLR Investment i.e., SLR Investment and Phillips go up and down completely randomly.

Pair Corralation between SLR Investment and Phillips

Assuming the 90 days horizon SLR Investment is expected to generate 6.71 times less return on investment than Phillips. But when comparing it to its historical volatility, SLR Investment Corp is 1.69 times less risky than Phillips. It trades about 0.03 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  10,446  in Phillips 66 on December 20, 2024 and sell it today you would earn a total of  1,338  from holding Phillips 66 or generate 12.81% return on investment over 90 days.

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

SLR Investment Corp  vs.  Phillips 66

SLR Investment Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SLR Investment Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, SLR Investment is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Phillips 66

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Phillips reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with SLR Investment and Phillips

The main advantage of trading using opposite SLR Investment and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SLR Investment 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 SLR Investment Corp 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.