Correlation Between WOODSIDE ENE and ConocoPhillips

Can any of the company-specific risk be diversified away by investing in both WOODSIDE ENE 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 WOODSIDE ENE and ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between WOODSIDE ENE SPADR and ConocoPhillips, you can compare the effects of market volatilities on WOODSIDE ENE 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 WOODSIDE ENE with a short position of ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of WOODSIDE ENE and ConocoPhillips.

Diversification Opportunities for WOODSIDE ENE and ConocoPhillips

0.1

Correlation Coefficient

WOODSIDE ENE  ConocoPhillips

Average diversification

The 3 months correlation between WOODSIDE and ConocoPhillips is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding WOODSIDE ENE SPADR and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and WOODSIDE ENE 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 WOODSIDE ENE SPADR 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 WOODSIDE ENE i.e., WOODSIDE ENE and ConocoPhillips go up and down completely randomly.

Pair Corralation between WOODSIDE ENE and ConocoPhillips

Assuming the 90 days horizon WOODSIDE ENE SPADR is expected to under-perform the ConocoPhillips. In addition to that, WOODSIDE ENE is 1.33 times more volatile than ConocoPhillips. It trades about -0.03 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.12 per unit of volatility. If you would invest  10,224  in ConocoPhillips on February 23, 2024 and sell it today you would earn a total of  828.00  from holding ConocoPhillips or generate 8.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.39%
Values	Daily Returns

WOODSIDE ENE SPADR  vs.  ConocoPhillips

WOODSIDE ENE SPADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WOODSIDE ENE SPADR has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, WOODSIDE ENE is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

ConocoPhillips

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, ConocoPhillips may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with WOODSIDE ENE and ConocoPhillips

The main advantage of trading using opposite WOODSIDE ENE and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WOODSIDE ENE 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 WOODSIDE ENE SPADR 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.