Correlation Between Phillips and World Kinect

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

By analyzing existing cross correlation between Phillips 66 and World Kinect, you can compare the effects of market volatilities on Phillips and World Kinect 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 Phillips with a short position of World Kinect. Check out your portfolio center. Please also check ongoing floating volatility patterns of Phillips and World Kinect.

Diversification Opportunities for Phillips and World Kinect

0.87

Correlation Coefficient

Phillips  World Kinect

Very poor diversification

The 3 months correlation between Phillips and World is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and World Kinect in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on World Kinect and Phillips 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 Phillips 66 are associated (or correlated) with World Kinect. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of World Kinect has no effect on the direction of Phillips i.e., Phillips and World Kinect go up and down completely randomly.

Pair Corralation between Phillips and World Kinect

Considering the 90-day investment horizon Phillips 66 is expected to under-perform the World Kinect. In addition to that, Phillips is 1.67 times more volatile than World Kinect. It trades about -0.04 of its total potential returns per unit of risk. World Kinect is currently generating about -0.07 per unit of volatility. If you would invest  3,055  in World Kinect on February 21, 2025 and sell it today you would lose (284.00) from holding World Kinect or give up 9.3% of portfolio value over 90 days.

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

Phillips 66  vs.  World Kinect

Phillips 66

Risk-Adjusted Performance

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

World Kinect

Risk-Adjusted Performance

Weak

Over the last 90 days World Kinect has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's forward-looking signals remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Phillips and World Kinect

The main advantage of trading using opposite Phillips and World Kinect positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Phillips position performs unexpectedly, World Kinect 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 World Kinect will offset losses from the drop in World Kinect's long position.

The idea behind Phillips 66 and World Kinect 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .