Correlation Between Valero Energy and Marathon Petroleum
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Marathon Petroleum 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 Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Marathon Petroleum Corp, you can compare the effects of market volatilities on Valero Energy and Marathon Petroleum 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 Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Marathon Petroleum.
Diversification Opportunities for Valero Energy and Marathon Petroleum
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valero and Marathon is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Marathon Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum Corp 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 Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum Corp has no effect on the direction of Valero Energy i.e., Valero Energy and Marathon Petroleum go up and down completely randomly.
Pair Corralation between Valero Energy and Marathon Petroleum
Considering the 90-day investment horizon Valero Energy is expected to generate 0.99 times more return on investment than Marathon Petroleum. However, Valero Energy is 1.01 times less risky than Marathon Petroleum. It trades about 0.04 of its potential returns per unit of risk. Marathon Petroleum Corp is currently generating about 0.03 per unit of risk. If you would invest 12,182 in Valero Energy on August 26, 2024 and sell it today you would earn a total of 1,909 from holding Valero Energy or generate 15.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Valero Energy vs. Marathon Petroleum Corp
Performance |
| Timeline |
| Valero Energy |
| Marathon Petroleum Corp |
Valero Energy and Marathon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Marathon Petroleum
The main advantage of trading using opposite Valero Energy and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Marathon Petroleum 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 Marathon Petroleum will offset losses from the drop in Marathon Petroleum's long position.| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
| Marathon Petroleum vs. Phillips 66 | Marathon Petroleum vs. HF Sinclair Corp | Marathon Petroleum vs. PBF Energy | Marathon Petroleum vs. Sunoco LP |
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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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