Correlation Between Barnwell Industries and ConocoPhillips

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

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

Diversification Opportunities for Barnwell Industries and ConocoPhillips

0.52

Correlation Coefficient

Barnwell Industries  ConocoPhillips

Very weak diversification

The 3 months correlation between Barnwell and ConocoPhillips is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Barnwell Industries and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Barnwell Industries 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 Barnwell Industries 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 Barnwell Industries i.e., Barnwell Industries and ConocoPhillips go up and down completely randomly.

Pair Corralation between Barnwell Industries and ConocoPhillips

Considering the 90-day investment horizon Barnwell Industries is expected to generate 2.59 times more return on investment than ConocoPhillips. However, Barnwell Industries is 2.59 times more volatile than ConocoPhillips. It trades about 0.32 of its potential returns per unit of risk. ConocoPhillips is currently generating about 0.25 per unit of risk. If you would invest  235.00  in Barnwell Industries on January 19, 2024 and sell it today you would earn a total of  44.00  from holding Barnwell Industries or generate 18.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.65%
Values	Daily Returns

Barnwell Industries  vs.  ConocoPhillips

Barnwell Industries

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Barnwell Industries are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Barnwell Industries may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ConocoPhillips

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 19 (%) 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 Barnwell Industries and ConocoPhillips

The main advantage of trading using opposite Barnwell Industries and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Barnwell Industries 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 Barnwell Industries 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.