Correlation Between Science Applications and ConocoPhillips

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

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

Diversification Opportunities for Science Applications and ConocoPhillips

0.04

Correlation Coefficient

Science Applications  ConocoPhillips

Significant diversification

The 3 months correlation between Science and ConocoPhillips is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Science Applications Internati and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Science Applications 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 Science Applications International 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 Science Applications i.e., Science Applications and ConocoPhillips go up and down completely randomly.

Pair Corralation between Science Applications and ConocoPhillips

Assuming the 90 days trading horizon Science Applications International is expected to under-perform the ConocoPhillips. In addition to that, Science Applications is 1.28 times more volatile than ConocoPhillips. It trades about -0.07 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.05 per unit of volatility. If you would invest  9,269  in ConocoPhillips on September 15, 2024 and sell it today you would earn a total of  452.00  from holding ConocoPhillips or generate 4.88% return on investment over 90 days.

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

Science Applications Internati  vs.  ConocoPhillips

Science Applications

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Science Applications International has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

ConocoPhillips

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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 Science Applications and ConocoPhillips

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

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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.