Correlation Between Phillips and Sunoco LP
Can any of the company-specific risk be diversified away by investing in both Phillips and Sunoco LP 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 Sunoco LP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Phillips 66 and Sunoco LP, you can compare the effects of market volatilities on Phillips and Sunoco LP 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 Sunoco LP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and Sunoco LP.
Diversification Opportunities for Phillips and Sunoco LP
Very weak diversification
The 3 months correlation between Phillips and Sunoco is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Sunoco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunoco LP 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 Sunoco LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunoco LP has no effect on the direction of Phillips i.e., Phillips and Sunoco LP go up and down completely randomly.
Pair Corralation between Phillips and Sunoco LP
Considering the 90-day investment horizon Phillips is expected to generate 1.16 times less return on investment than Sunoco LP. But when comparing it to its historical volatility, Phillips 66 is 1.04 times less risky than Sunoco LP. It trades about 0.02 of its potential returns per unit of risk. Sunoco LP is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 5,057 in Sunoco LP on August 27, 2024 and sell it today you would earn a total of 376.00 from holding Sunoco LP or generate 7.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Phillips 66 vs. Sunoco LP
Performance |
| Timeline |
| Phillips 66 |
| Sunoco LP |
Phillips and Sunoco LP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Phillips and Sunoco LP
The main advantage of trading using opposite Phillips and Sunoco LP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, Sunoco LP 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 Sunoco LP will offset losses from the drop in Sunoco LP's long position.| Phillips vs. Delek Energy | Phillips vs. Crossamerica Partners LP | Phillips vs. Valvoline | Phillips vs. Star Gas Partners |
| Sunoco LP vs. Delek Energy | Sunoco LP vs. Crossamerica Partners LP | Sunoco LP vs. CVR Energy | Sunoco LP vs. Phillips 66 |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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