Correlation Between Valero Energy and Phillips
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Phillips 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 Valero Energy and Phillips into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Phillips 66, you can compare the effects of market volatilities on Valero Energy and Phillips 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 Valero Energy with a short position of Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Phillips.
Diversification Opportunities for Valero Energy and Phillips
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Valero and Phillips is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 and Valero 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 Valero Energy are associated (or correlated) with Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Valero Energy i.e., Valero Energy and Phillips go up and down completely randomly.
Pair Corralation between Valero Energy and Phillips
Considering the 90-day investment horizon Valero Energy is expected to generate 1.34 times less return on investment than Phillips. In addition to that, Valero Energy is 1.11 times more volatile than Phillips 66. It trades about 0.12 of its total potential returns per unit of risk. Phillips 66 is currently generating about 0.19 per unit of volatility. If you would invest 11,122 in Phillips 66 on January 19, 2024 and sell it today you would earn a total of 4,209 from holding Phillips 66 or generate 37.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. Phillips 66
Performance |
| Timeline |
| Valero Energy |
| Phillips 66 |
Valero Energy and Phillips Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Phillips
The main advantage of trading using opposite Valero Energy and Phillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Phillips 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 Phillips will offset losses from the drop in Phillips' long position.| Valero Energy vs. Clean Energy Fuels | Valero Energy vs. Icahn Enterprises LP | Valero Energy vs. Delek Logistics Partners | Valero Energy vs. Adams Resources Energy |
| Phillips vs. Clean Energy Fuels | Phillips vs. Icahn Enterprises LP | Phillips vs. Delek Logistics Partners | Phillips vs. Adams Resources Energy |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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