Correlation Between Black Stone and ConocoPhillips

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

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

Diversification Opportunities for Black Stone and ConocoPhillips

0.62

Correlation Coefficient

Black Stone  ConocoPhillips

Poor diversification

The 3 months correlation between Black and ConocoPhillips is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Black Stone Minerals and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Black Stone 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 Black Stone Minerals 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 Black Stone i.e., Black Stone and ConocoPhillips go up and down completely randomly.

Pair Corralation between Black Stone and ConocoPhillips

Considering the 90-day investment horizon Black Stone is expected to generate 2.55 times less return on investment than ConocoPhillips. In addition to that, Black Stone is 1.55 times more volatile than ConocoPhillips. It trades about 0.04 of its total potential returns per unit of risk. ConocoPhillips is currently generating about 0.16 per unit of volatility. If you would invest  12,599  in ConocoPhillips on January 26, 2024 and sell it today you would earn a total of  329.00  from holding ConocoPhillips or generate 2.61% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Black Stone Minerals  vs.  ConocoPhillips

Black Stone Minerals

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Black Stone Minerals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Black Stone is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the 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 Black Stone and ConocoPhillips

The main advantage of trading using opposite Black Stone and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Black Stone 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 Black Stone Minerals 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.