Correlation Between Marathon Petroleum and Automatic Data
Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and Automatic Data 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 Automatic Data 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 Automatic Data Processing, you can compare the effects of market volatilities on Marathon Petroleum and Automatic Data 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 Automatic Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and Automatic Data.
Diversification Opportunities for Marathon Petroleum and Automatic Data
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between Marathon and Automatic is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and Automatic Data Processing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Automatic Data Processing 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 Automatic Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Automatic Data Processing has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Automatic Data go up and down completely randomly.
Pair Corralation between Marathon Petroleum and Automatic Data
Assuming the 90 days horizon Marathon Petroleum Corp is expected to generate 1.73 times more return on investment than Automatic Data. However, Marathon Petroleum is 1.73 times more volatile than Automatic Data Processing. It trades about 0.28 of its potential returns per unit of risk. Automatic Data Processing is currently generating about 0.42 per unit of risk. If you would invest 13,114 in Marathon Petroleum Corp on September 4, 2024 and sell it today you would earn a total of 1,542 from holding Marathon Petroleum Corp or generate 11.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marathon Petroleum Corp vs. Automatic Data Processing
Performance |
| Timeline |
| Marathon Petroleum Corp |
| Automatic Data Processing |
Marathon Petroleum and Automatic Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Petroleum and Automatic Data
The main advantage of trading using opposite Marathon Petroleum and Automatic Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Petroleum position performs unexpectedly, Automatic Data 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 Automatic Data will offset losses from the drop in Automatic Data's long position.| Marathon Petroleum vs. Public Storage | Marathon Petroleum vs. Science Applications International | Marathon Petroleum vs. Datadog | Marathon Petroleum vs. INFORMATION SVC GRP |
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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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