Correlation Between NESTE OYJ and Phillips
Can any of the company-specific risk be diversified away by investing in both NESTE OYJ 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 NESTE OYJ and Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NESTE OYJ UNSPADR and Phillips 66, you can compare the effects of market volatilities on NESTE OYJ 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 NESTE OYJ with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of NESTE OYJ and Phillips.
Diversification Opportunities for NESTE OYJ and Phillips
Modest diversification
The 3 months correlation between NESTE and Phillips is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding NESTE OYJ UNSPADR and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and NESTE OYJ 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 NESTE OYJ UNSPADR 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 NESTE OYJ i.e., NESTE OYJ and Phillips go up and down completely randomly.
Pair Corralation between NESTE OYJ and Phillips
Assuming the 90 days trading horizon NESTE OYJ UNSPADR is expected to under-perform the Phillips. In addition to that, NESTE OYJ is 1.29 times more volatile than Phillips 66. It trades about -0.24 of its total potential returns per unit of risk. Phillips 66 is currently generating about -0.12 per unit of volatility. If you would invest 11,845 in Phillips 66 on September 23, 2024 and sell it today you would lose (1,305) from holding Phillips 66 or give up 11.02% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NESTE OYJ UNSPADR vs. Phillips 66
Performance |
| Timeline |
| NESTE OYJ UNSPADR |
| Phillips 66 |
NESTE OYJ and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NESTE OYJ and Phillips
The main advantage of trading using opposite NESTE OYJ and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NESTE OYJ 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.| NESTE OYJ vs. Reliance Industries Limited | NESTE OYJ vs. Marathon Petroleum Corp | NESTE OYJ vs. Valero Energy | NESTE OYJ vs. Neste Oyj |
| Phillips vs. Reliance Industries Limited | Phillips vs. Marathon Petroleum Corp | Phillips vs. Valero Energy | Phillips vs. Neste Oyj |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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