Correlation Between Vertex Energy and Delek Logistics

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

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

Diversification Opportunities for Vertex Energy and Delek Logistics

0.71

Correlation Coefficient

Vertex Energy  Delek Logistics

Poor diversification

The 3 months correlation between Vertex and Delek is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Vertex Energy and Delek Logistics Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delek Logistics Partners and Vertex 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 Vertex Energy are associated (or correlated) with Delek Logistics. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delek Logistics Partners has no effect on the direction of Vertex Energy i.e., Vertex Energy and Delek Logistics go up and down completely randomly.

Pair Corralation between Vertex Energy and Delek Logistics

Given the investment horizon of 90 days Vertex Energy is expected to generate 9.44 times more return on investment than Delek Logistics. However, Vertex Energy is 9.44 times more volatile than Delek Logistics Partners. It trades about 0.02 of its potential returns per unit of risk. Delek Logistics Partners is currently generating about -0.12 per unit of risk. If you would invest  136.00  in Vertex Energy on February 1, 2024 and sell it today you would lose (6.00) from holding Vertex Energy or give up 4.41% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Vertex Energy  vs.  Delek Logistics Partners

Vertex Energy

Risk-Adjusted Performance

0 of 100

Weak

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

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite inconsistent performance in the last few months, the Stock's forward-looking signals remain quite persistent which may send shares a bit higher in June 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Vertex Energy and Delek Logistics

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

The idea behind Vertex Energy and Delek Logistics Partners 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.