Correlation Between Sunoco LP and Valero Energy
Can any of the company-specific risk be diversified away by investing in both Sunoco LP and Valero Energy 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 Sunoco LP and Valero Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sunoco LP and Valero Energy, you can compare the effects of market volatilities on Sunoco LP and Valero Energy 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 Sunoco LP with a short position of Valero Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sunoco LP and Valero Energy.
Diversification Opportunities for Sunoco LP and Valero Energy
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Sunoco and Valero is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Sunoco LP and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Sunoco LP 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 Sunoco LP are associated (or correlated) with Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Sunoco LP i.e., Sunoco LP and Valero Energy go up and down completely randomly.
Pair Corralation between Sunoco LP and Valero Energy
Considering the 90-day investment horizon Sunoco LP is expected to generate 1.73 times less return on investment than Valero Energy. But when comparing it to its historical volatility, Sunoco LP is 1.14 times less risky than Valero Energy. It trades about 0.03 of its potential returns per unit of risk. Valero Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 12,281 in Valero Energy on August 27, 2024 and sell it today you would earn a total of 1,810 from holding Valero Energy or generate 14.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sunoco LP vs. Valero Energy
Performance |
| Timeline |
| Sunoco LP |
| Valero Energy |
Sunoco LP and Valero Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sunoco LP and Valero Energy
The main advantage of trading using opposite Sunoco LP and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunoco LP position performs unexpectedly, Valero Energy 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 Valero Energy will offset losses from the drop in Valero Energy's long position.| Sunoco LP vs. Delek Energy | Sunoco LP vs. Crossamerica Partners LP | Sunoco LP vs. CVR Energy | Sunoco LP vs. Phillips 66 |
| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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