Correlation Between Civitas Resources and ConocoPhillips

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

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

Diversification Opportunities for Civitas Resources and ConocoPhillips

0.9

Correlation Coefficient

Civitas Resources  ConocoPhillips

Almost no diversification

The 3 months correlation between Civitas and ConocoPhillips is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Civitas Resources and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Civitas 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 Civitas 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 Civitas Resources i.e., Civitas Resources and ConocoPhillips go up and down completely randomly.

Pair Corralation between Civitas Resources and ConocoPhillips

Given the investment horizon of 90 days Civitas Resources is expected to under-perform the ConocoPhillips. But the stock apears to be less risky and, when comparing its historical volatility, Civitas Resources is 1.01 times less risky than ConocoPhillips. The stock trades about -0.22 of its potential returns per unit of risk. The ConocoPhillips is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  12,191  in ConocoPhillips on January 20, 2024 and sell it today you would earn a total of  590.00  from holding ConocoPhillips or generate 4.84% return on investment over 90 days.

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

Civitas Resources  vs.  ConocoPhillips

Civitas Resources

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civitas Resources are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak basic indicators, Civitas Resources may actually be approaching a critical reversion point that can send shares even higher in May 2024.

ConocoPhillips

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ConocoPhillips are ranked lower than 18 (%) 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 Civitas Resources and ConocoPhillips

The main advantage of trading using opposite Civitas Resources and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Civitas 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 Civitas 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..