Correlation Between ARC Resources and ConocoPhillips

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

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

Diversification Opportunities for ARC Resources and ConocoPhillips

-0.83

Correlation Coefficient

ARC Resources  ConocoPhillips

Pay attention - limited upside

The 3 months correlation between ARC and ConocoPhillips is -0.83. Overlapping area represents the amount of risk that can be diversified away by holding ARC Resources and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and ARC 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 ARC 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 ARC Resources i.e., ARC Resources and ConocoPhillips go up and down completely randomly.

Pair Corralation between ARC Resources and ConocoPhillips

If you would invest  9,995  in ConocoPhillips on January 25, 2024 and sell it today you would earn a total of  2,989  from holding ConocoPhillips or generate 29.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	0.4%
Values	Daily Returns

ARC Resources  vs.  ConocoPhillips

ARC Resources

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ARC Resources has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, ARC Resources 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

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, ConocoPhillips reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ARC Resources and ConocoPhillips

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

The idea behind ARC Resources 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.

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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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.