Correlation Between ConocoPhillips and Petro Rio

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

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

Diversification Opportunities for ConocoPhillips and Petro Rio

-0.54

Correlation Coefficient

ConocoPhillips  Petro Rio

Excellent diversification

The 3 months correlation between ConocoPhillips and Petro is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding ConocoPhillips and Petro Rio SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petro Rio SA and ConocoPhillips 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 ConocoPhillips are associated (or correlated) with Petro Rio. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petro Rio SA has no effect on the direction of ConocoPhillips i.e., ConocoPhillips and Petro Rio go up and down completely randomly.

Pair Corralation between ConocoPhillips and Petro Rio

Assuming the 90 days trading horizon ConocoPhillips is expected to generate 1.11 times more return on investment than Petro Rio. However, ConocoPhillips is 1.11 times more volatile than Petro Rio SA. It trades about -0.01 of its potential returns per unit of risk. Petro Rio SA is currently generating about -0.07 per unit of risk. If you would invest  5,028  in ConocoPhillips on September 22, 2024 and sell it today you would lose (160.00) from holding ConocoPhillips or give up 3.18% of portfolio value over 90 days.

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

ConocoPhillips  vs.  Petro Rio SA

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 somewhat strong basic indicators, ConocoPhillips is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Petro Rio SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Petro Rio SA 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.

Pair Trading with ConocoPhillips and Petro Rio

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

The idea behind ConocoPhillips and Petro Rio SA 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.