Correlation Between Phillips and Sunoco LP

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

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

Diversification Opportunities for Phillips and Sunoco LP

-0.53

Correlation Coefficient

Phillips  Sunoco LP

Excellent diversification

The 3 months correlation between Phillips and Sunoco is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Phillips 66 and Sunoco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunoco LP 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 Sunoco LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunoco LP has no effect on the direction of Phillips i.e., Phillips and Sunoco LP go up and down completely randomly.

Pair Corralation between Phillips and Sunoco LP

Considering the 90-day investment horizon Phillips 66 is expected to generate 1.21 times more return on investment than Sunoco LP. However, Phillips is 1.21 times more volatile than Sunoco LP. It trades about 0.13 of its potential returns per unit of risk. Sunoco LP is currently generating about -0.03 per unit of risk. If you would invest  10,613  in Phillips 66 on May 2, 2025 and sell it today you would earn a total of  1,827  from holding Phillips 66 or generate 17.21% return on investment over 90 days.

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

Phillips 66  vs.  Sunoco LP

Phillips 66

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Phillips 66 are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Phillips showed solid returns over the last few months and may actually be approaching a breakup point.

Sunoco LP

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Phillips and Sunoco LP

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

The idea behind Phillips 66 and Sunoco LP 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.