Correlation Between Phillips and CVR Energy
Can any of the company-specific risk be diversified away by investing in both Phillips and CVR Energy 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 CVR Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phillips 66 and CVR Energy, you can compare the effects of market volatilities on Phillips and CVR Energy 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 CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and CVR Energy.
Diversification Opportunities for Phillips and CVR Energy
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Phillips and CVR is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Phillips i.e., Phillips and CVR Energy go up and down completely randomly.
Pair Corralation between Phillips and CVR Energy
Considering the 90-day investment horizon Phillips 66 is expected to generate 0.62 times more return on investment than CVR Energy. However, Phillips 66 is 1.62 times less risky than CVR Energy. It trades about 0.04 of its potential returns per unit of risk. CVR Energy is currently generating about -0.02 per unit of risk. If you would invest 9,928 in Phillips 66 on August 23, 2024 and sell it today you would earn a total of 3,213 from holding Phillips 66 or generate 32.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Phillips 66 vs. CVR Energy
Performance |
| Timeline |
| Phillips 66 |
| CVR Energy |
Phillips and CVR Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phillips and CVR Energy
The main advantage of trading using opposite Phillips and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, CVR Energy 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 CVR Energy will offset losses from the drop in CVR Energy's long position.| Phillips vs. Delek Logistics Partners | Phillips vs. PBF Energy | Phillips vs. HF Sinclair Corp | Phillips vs. Par Pacific Holdings |
| CVR Energy vs. Delek Logistics Partners | CVR Energy vs. PBF Energy | CVR Energy vs. HF Sinclair Corp | CVR Energy vs. Par Pacific Holdings |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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