Correlation Between Valero Energy and Sunoco LP
Can any of the company-specific risk be diversified away by investing in both Valero Energy and Sunoco LP 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 Sunoco LP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Valero Energy and Sunoco LP, you can compare the effects of market volatilities on Valero Energy and Sunoco LP 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 Sunoco LP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Sunoco LP.
Diversification Opportunities for Valero Energy and Sunoco LP
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Valero and Sunoco is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Sunoco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunoco LP 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 Sunoco LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunoco LP has no effect on the direction of Valero Energy i.e., Valero Energy and Sunoco LP go up and down completely randomly.
Pair Corralation between Valero Energy and Sunoco LP
Considering the 90-day investment horizon Valero Energy is expected to generate 1.25 times less return on investment than Sunoco LP. In addition to that, Valero Energy is 1.26 times more volatile than Sunoco LP. It trades about 0.12 of its total potential returns per unit of risk. Sunoco LP is currently generating about 0.2 per unit of volatility. If you would invest 5,086 in Sunoco LP on August 23, 2024 and sell it today you would earn a total of 316.00 from holding Sunoco LP or generate 6.21% 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. Sunoco LP
Performance |
| Timeline |
| Valero Energy |
| Sunoco LP |
Valero Energy and Sunoco LP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Valero Energy and Sunoco LP
The main advantage of trading using opposite Valero Energy and Sunoco LP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Valero Energy position performs unexpectedly, Sunoco LP 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 Sunoco LP will offset losses from the drop in Sunoco LP's long position.| Valero Energy vs. Phillips 66 | Valero Energy vs. HF Sinclair Corp | Valero Energy vs. PBF Energy | Valero Energy vs. CVR Energy |
| Sunoco LP vs. Delek Energy | Sunoco LP vs. Crossamerica Partners LP | Sunoco LP vs. CVR Energy | Sunoco LP vs. Phillips 66 |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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