Correlation Between Marathon Petroleum and CVS Health
Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and CVS Health 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 Marathon Petroleum and CVS Health into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Petroleum and CVS Health, you can compare the effects of market volatilities on Marathon Petroleum and CVS Health 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 Marathon Petroleum with a short position of CVS Health. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and CVS Health.
Diversification Opportunities for Marathon Petroleum and CVS Health
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Marathon and CVS is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum and CVS Health in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVS Health and Marathon Petroleum 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 Marathon Petroleum are associated (or correlated) with CVS Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVS Health has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and CVS Health go up and down completely randomly.
Pair Corralation between Marathon Petroleum and CVS Health
Assuming the 90 days trading horizon Marathon Petroleum is expected to generate 0.6 times more return on investment than CVS Health. However, Marathon Petroleum is 1.67 times less risky than CVS Health. It trades about 0.03 of its potential returns per unit of risk. CVS Health is currently generating about 0.0 per unit of risk. If you would invest 83,409 in Marathon Petroleum on November 3, 2024 and sell it today you would earn a total of 7,395 from holding Marathon Petroleum or generate 8.87% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 85.36% |
| Values | Daily Returns |
Marathon Petroleum vs. CVS Health
Performance |
| Timeline |
| Marathon Petroleum |
| CVS Health |
Marathon Petroleum and CVS Health Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Petroleum and CVS Health
The main advantage of trading using opposite Marathon Petroleum and CVS Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Petroleum position performs unexpectedly, CVS Health 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 CVS Health will offset losses from the drop in CVS Health's long position.| Marathon Petroleum vs. Valero Energy | Marathon Petroleum vs. Phillips 66 | Marathon Petroleum vs. Cosan SA | Marathon Petroleum vs. Refinaria de Petrleos |
| CVS Health vs. Globus Medical, | CVS Health vs. Pure Storage, | CVS Health vs. TAL Education Group | CVS Health vs. Fair Isaac |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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