Correlation Between Battalion Oil and ConocoPhillips

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

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

Diversification Opportunities for Battalion Oil and ConocoPhillips

-0.41

Correlation Coefficient

Battalion Oil  ConocoPhillips

Very good diversification

The 3 months correlation between Battalion and ConocoPhillips is -0.41. Overlapping area represents the amount of risk that can be diversified away by holding Battalion Oil Corp and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Battalion Oil 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 Battalion Oil Corp 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 Battalion Oil i.e., Battalion Oil and ConocoPhillips go up and down completely randomly.

Pair Corralation between Battalion Oil and ConocoPhillips

Given the investment horizon of 90 days Battalion Oil Corp is expected to under-perform the ConocoPhillips. In addition to that, Battalion Oil is 3.39 times more volatile than ConocoPhillips. It trades about -0.02 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.02 per unit of volatility. If you would invest  12,081  in ConocoPhillips on January 26, 2024 and sell it today you would earn a total of  847.00  from holding ConocoPhillips or generate 7.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Battalion Oil Corp  vs.  ConocoPhillips

Battalion Oil Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Battalion Oil Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

ConocoPhillips

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 16 (%) 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 Battalion Oil and ConocoPhillips

The main advantage of trading using opposite Battalion Oil and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Battalion Oil 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 Battalion Oil Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.