Correlation Between Marathon Petroleum and China Oil
Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and China Oil 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 China Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Petroleum Corp and China Oil And, you can compare the effects of market volatilities on Marathon Petroleum and China Oil 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 China Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and China Oil.
Diversification Opportunities for Marathon Petroleum and China Oil
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Marathon and China is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and China Oil And in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Oil And 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 Corp are associated (or correlated) with China Oil. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Oil And has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and China Oil go up and down completely randomly.
Pair Corralation between Marathon Petroleum and China Oil
Considering the 90-day investment horizon Marathon Petroleum is expected to generate 4.63 times less return on investment than China Oil. But when comparing it to its historical volatility, Marathon Petroleum Corp is 6.23 times less risky than China Oil. It trades about 0.05 of its potential returns per unit of risk. China Oil And is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3.00 in China Oil And on August 31, 2024 and sell it today you would lose (1.00) from holding China Oil And or give up 33.33% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.79% |
| Values | Daily Returns |
Marathon Petroleum Corp vs. China Oil And
Performance |
| Timeline |
| Marathon Petroleum Corp |
| China Oil And |
Marathon Petroleum and China Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Petroleum and China Oil
The main advantage of trading using opposite Marathon Petroleum and China Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Petroleum position performs unexpectedly, China Oil 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 China Oil will offset losses from the drop in China Oil's long position.| Marathon Petroleum vs. Phillips 66 | Marathon Petroleum vs. HF Sinclair Corp | Marathon Petroleum vs. PBF Energy | Marathon Petroleum vs. Sunoco LP |
| China Oil vs. CVR Energy | China Oil vs. Valero Energy | China Oil vs. Phillips 66 | China Oil vs. Marathon Petroleum Corp |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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