Correlation Between Amazon and Marathon Petroleum
Can any of the company-specific risk be diversified away by investing in both Amazon and Marathon Petroleum 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 Amazon and Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Amazon Inc and Marathon Petroleum, you can compare the effects of market volatilities on Amazon and Marathon Petroleum 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 Amazon with a short position of Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amazon and Marathon Petroleum.
Diversification Opportunities for Amazon and Marathon Petroleum
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Amazon and Marathon is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Amazon Inc and Marathon Petroleum in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum and Amazon 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 Amazon Inc are associated (or correlated) with Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum has no effect on the direction of Amazon i.e., Amazon and Marathon Petroleum go up and down completely randomly.
Pair Corralation between Amazon and Marathon Petroleum
Assuming the 90 days trading horizon Amazon Inc is expected to generate 1.1 times more return on investment than Marathon Petroleum. However, Amazon is 1.1 times more volatile than Marathon Petroleum. It trades about 0.1 of its potential returns per unit of risk. Marathon Petroleum is currently generating about 0.06 per unit of risk. If you would invest 8,492 in Amazon Inc on August 30, 2024 and sell it today you would earn a total of 10,934 from holding Amazon Inc or generate 128.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Amazon Inc vs. Marathon Petroleum
Performance |
| Timeline |
| Amazon Inc |
| Marathon Petroleum |
Amazon and Marathon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Amazon and Marathon Petroleum
The main advantage of trading using opposite Amazon and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Amazon position performs unexpectedly, Marathon Petroleum 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 Marathon Petroleum will offset losses from the drop in Marathon Petroleum's long position.| Amazon vs. Apple Inc | Amazon vs. Apple Inc | Amazon vs. Superior Plus Corp | Amazon vs. SIVERS SEMICONDUCTORS AB |
| Marathon Petroleum vs. TRAVEL LEISURE DL 01 | Marathon Petroleum vs. MACOM Technology Solutions | Marathon Petroleum vs. Vishay Intertechnology | Marathon Petroleum vs. Columbia Sportswear |
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.
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