Correlation Between Phillips and Air Products
Can any of the company-specific risk be diversified away by investing in both Phillips and Air Products 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 Phillips and Air Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phillips 66 and Air Products and, you can compare the effects of market volatilities on Phillips and Air Products 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 Phillips with a short position of Air Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Air Products.
Diversification Opportunities for Phillips and Air Products
0.36 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Phillips and Air is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Air Products and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Air Products and Phillips 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 Phillips 66 are associated (or correlated) with Air Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Air Products has no effect on the direction of Phillips i.e., Phillips and Air Products go up and down completely randomly.
Pair Corralation between Phillips and Air Products
Assuming the 90 days trading horizon Phillips 66 is expected to under-perform the Air Products. But the stock apears to be less risky and, when comparing its historical volatility, Phillips 66 is 1.07 times less risky than Air Products. The stock trades about -0.47 of its potential returns per unit of risk. The Air Products and is currently generating about -0.35 of returns per unit of risk over similar time horizon. If you would invest 49,749 in Air Products and on October 9, 2024 and sell it today you would lose (4,899) from holding Air Products and or give up 9.85% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Phillips 66 vs. Air Products and
Performance |
| Timeline |
| Phillips 66 |
| Air Products |
Phillips and Air Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phillips and Air Products
The main advantage of trading using opposite Phillips and Air Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, Air Products 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 Air Products will offset losses from the drop in Air Products' long position.| Phillips vs. Lloyds Banking Group | Phillips vs. MAHLE Metal Leve | Phillips vs. Bank of America | Phillips vs. Citizens Financial Group, |
| Air Products vs. Taiwan Semiconductor Manufacturing | Air Products vs. Apple Inc | Air Products vs. Alibaba Group Holding | Air Products vs. Banco Santander Chile |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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