Correlation Between Parex Resources and ConocoPhillips
Can any of the company-specific risk be diversified away by investing in both Parex Resources 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 Parex Resources and ConocoPhillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Parex Resources and ConocoPhillips, you can compare the effects of market volatilities on Parex Resources 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 Parex Resources with a short position of ConocoPhillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Parex Resources and ConocoPhillips.
Diversification Opportunities for Parex Resources and ConocoPhillips
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Parex and ConocoPhillips is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Parex Resources and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Parex Resources 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 Parex Resources 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 Parex Resources i.e., Parex Resources and ConocoPhillips go up and down completely randomly.
Pair Corralation between Parex Resources and ConocoPhillips
Assuming the 90 days horizon Parex Resources is expected to generate 1.34 times more return on investment than ConocoPhillips. However, Parex Resources is 1.34 times more volatile than ConocoPhillips. It trades about 0.2 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.17 per unit of risk. If you would invest 1,477 in Parex Resources on February 13, 2024 and sell it today you would earn a total of 295.00 from holding Parex Resources or generate 19.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Parex Resources vs. ConocoPhillips
Performance |
| Timeline |
| Parex Resources |
| ConocoPhillips |
Parex Resources and ConocoPhillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Parex Resources and ConocoPhillips
The main advantage of trading using opposite Parex Resources and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Parex Resources 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.| Parex Resources vs. Petro Viking Energy | Parex Resources vs. Surge Energy | Parex Resources vs. Razor Energy Corp | Parex Resources vs. Prospera Energy |
| ConocoPhillips vs. Exela Technologies | ConocoPhillips vs. Phunware | ConocoPhillips vs. Mullen Automotive | ConocoPhillips vs. Aterian |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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