Kevin B.

ConocoPhillips: More Than Just a Great Stock

Corelations did not converge at 1. If you notice for the two year holding peroid the DJ-AGI out performed the S&P500. So in terms of portfolio diversification by holding the DJ-AGI you beat the market which is mentioned in the article by "When the DJ-AGI is added to a balanced portfolio of equities and bonds, the Sharpe Ratio will increase due to the DJ-AGI having a similar volatility to the S&P 500, as well as higher returns than bonds. The exposure and diversification in commodities along with reducing a portfolio's market risk and increased returns comparable to bonds will create an outstanding complement to any portfolio"

Just because things fall in price together does not mean they are correlated at 1. Nothing is perfectly correlated - ther will always be some error in statistics. You would be up on the market by about 8%+ with a 50% - 50% mix of stocks and the DJ-Index. So diversification is quite benneficial.

ConocoPhillips: More Than Just a Great Stock

Well i dont think debt is of great concern for these oil giants. They generate enough revenues/profits in any given quarter to cover the entire debt on the balance sheet. Debt could be due to growth and expansion of the company - XOM and CVX are at least twice the size in market cap. So the growth of COP would be in direct correlation with higher debt. Debt is not always a bad thing. Its only bad if you cant pay it off - in which COP will have no problems.

ConocoPhillips: More Than Just a Great Stock

See the second chart - since Oct 2008 COP has de-pegged itsself in a range from XOM and CVX. If they were trading in correlation after Oct 2008 they would be trading along side eachother - which they are not. Thus a potential opportunity refrenced in the article.