Correlation Between Empire Energy and ConocoPhillips

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

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

Diversification Opportunities for Empire Energy and ConocoPhillips

0.91

Correlation Coefficient

Empire Energy  ConocoPhillips

Almost no diversification

The 3 months correlation between Empire and ConocoPhillips is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Empire Energy Group and ConocoPhillips in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ConocoPhillips and Empire Energy 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 Empire Energy Group 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 Empire Energy i.e., Empire Energy and ConocoPhillips go up and down completely randomly.

Pair Corralation between Empire Energy and ConocoPhillips

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	95.45%
Values	Daily Returns

Empire Energy Group  vs.  ConocoPhillips

Empire Energy Group

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Empire Energy Group are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Empire Energy reported solid returns over the last few months and may actually be approaching a breakup point.

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 Empire Energy and ConocoPhillips

The main advantage of trading using opposite Empire Energy and ConocoPhillips positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empire Energy 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 Empire Energy Group 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.