Correlation Between Suncor Energy and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Suncor Energy and ConocoPhillips 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 Suncor Energy and ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Suncor Energy and ConocoPhillips, you can compare the effects of market volatilities on Suncor Energy and ConocoPhillips 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 Suncor Energy with a short position of ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Suncor Energy and ConocoPhillips.
Diversification Opportunities for Suncor Energy and ConocoPhillips
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Suncor and ConocoPhillips is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Suncor Energy and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Suncor Energy 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 Suncor Energy are associated (or correlated) with ConocoPhillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ConocoPhillips has no effect on the direction of Suncor Energy i.e., Suncor Energy and ConocoPhillips go up and down completely randomly.
Pair Corralation between Suncor Energy and ConocoPhillips
Allowing for the 90-day total investment horizon Suncor Energy is expected to generate 1.1 times more return on investment than ConocoPhillips. However, Suncor Energy is 1.1 times more volatile than ConocoPhillips. It trades about 0.32 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.34 per unit of risk. If you would invest 3,226 in Suncor Energy on January 20, 2024 and sell it today you would earn a total of 579.00 from holding Suncor Energy or generate 17.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 97.73% |
| Values | Daily Returns |
Suncor Energy vs. ConocoPhillips
Performance |
| Timeline |
| Suncor Energy |
| ConocoPhillips |
Suncor Energy and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Suncor Energy and ConocoPhillips
The main advantage of trading using opposite Suncor Energy and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Suncor Energy position performs unexpectedly, ConocoPhillips 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 ConocoPhillips will offset losses from the drop in ConocoPhillips' long position.The idea behind Suncor Energy and ConocoPhillips 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.| ConocoPhillips vs. Diamondback Energy | ConocoPhillips vs. Pioneer Natural Resources | ConocoPhillips vs. APA Corporation | ConocoPhillips vs. Hess Corporation |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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