Correlation Between Valero Energy and China Oil
Can any of the company-specific risk be diversified away by investing in both Valero Energy 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 Valero Energy and China Oil into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and China Oil And, you can compare the effects of market volatilities on Valero Energy 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 Valero Energy with a short position of China Oil. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and China Oil.
Diversification Opportunities for Valero Energy and China Oil
0.18 | Correlation Coefficient |
Average diversification
The 3 months correlation between Valero and China is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy 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 Valero Energy 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 Valero Energy 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 Valero Energy i.e., Valero Energy and China Oil go up and down completely randomly.
Pair Corralation between Valero Energy and China Oil
Considering the 90-day investment horizon Valero Energy is expected to generate 10.55 times less return on investment than China Oil. But when comparing it to its historical volatility, Valero Energy is 8.49 times less risky than China Oil. It trades about 0.04 of its potential returns per unit of risk. China Oil And is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2.00 in China Oil And on September 2, 2024 and sell it today you would earn a total of 0.00 from holding China Oil And or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. China Oil And
Performance |
| Timeline |
| Valero Energy |
| China Oil And |
Valero Energy and China Oil Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and China Oil
The main advantage of trading using opposite Valero Energy and China Oil positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy 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.| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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