Correlation Between Marathon Petroleum and Energisa
Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and Energisa 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 Energisa into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Petroleum and Energisa SA, you can compare the effects of market volatilities on Marathon Petroleum and Energisa 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 Energisa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and Energisa.
Diversification Opportunities for Marathon Petroleum and Energisa
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Marathon and Energisa is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum and Energisa SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energisa SA 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 Energisa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energisa SA has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Energisa go up and down completely randomly.
Pair Corralation between Marathon Petroleum and Energisa
Assuming the 90 days trading horizon Marathon Petroleum is expected to generate 0.89 times more return on investment than Energisa. However, Marathon Petroleum is 1.13 times less risky than Energisa. It trades about 0.07 of its potential returns per unit of risk. Energisa SA is currently generating about 0.01 per unit of risk. If you would invest 56,800 in Marathon Petroleum on September 2, 2024 and sell it today you would earn a total of 34,700 from holding Marathon Petroleum or generate 61.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 72.46% |
| Values | Daily Returns |
Marathon Petroleum vs. Energisa SA
Performance |
| Timeline |
| Marathon Petroleum |
| Energisa SA |
Marathon Petroleum and Energisa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Petroleum and Energisa
The main advantage of trading using opposite Marathon Petroleum and Energisa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Petroleum position performs unexpectedly, Energisa 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 Energisa will offset losses from the drop in Energisa's long position.| Marathon Petroleum vs. Phillips 66 | Marathon Petroleum vs. Cosan SA | Marathon Petroleum vs. Refinaria de Petrleos |
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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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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