Correlation Between Holly Energy and MPLX LP

Can any of the company-specific risk be diversified away by investing in both Holly Energy and MPLX 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 Holly Energy and MPLX LP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Holly Energy Partners and MPLX LP, you can compare the effects of market volatilities on Holly Energy and MPLX 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 Holly Energy with a short position of MPLX LP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Holly Energy and MPLX LP.

Diversification Opportunities for Holly Energy and MPLX LP

-0.55

Correlation Coefficient

Holly Energy  MPLX LP

Excellent diversification

The 3 months correlation between Holly and MPLX is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Holly Energy Partners and MPLX LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPLX LP and Holly 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 Holly Energy Partners are associated (or correlated) with MPLX LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPLX LP has no effect on the direction of Holly Energy i.e., Holly Energy and MPLX LP go up and down completely randomly.

Pair Corralation between Holly Energy and MPLX LP

If you would invest  3,886  in MPLX LP on February 23, 2024 and sell it today you would earn a total of  147.00  from holding MPLX LP or generate 3.78% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Holly Energy Partners  vs.  MPLX LP

Holly Energy Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holly Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Holly Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

MPLX LP

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MPLX LP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong essential indicators, MPLX LP is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Holly Energy and MPLX LP

The main advantage of trading using opposite Holly Energy and MPLX LP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holly Energy position performs unexpectedly, MPLX 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 MPLX LP will offset losses from the drop in MPLX LP's long position.

The idea behind Holly Energy Partners and MPLX LP pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.