Correlation Between Marathon Petroleum and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and BP Prudhoe 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 Marathon Petroleum and BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Marathon Petroleum Corp and BP Prudhoe Bay, you can compare the effects of market volatilities on Marathon Petroleum and BP Prudhoe 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 Marathon Petroleum with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and BP Prudhoe.
Diversification Opportunities for Marathon Petroleum and BP Prudhoe
0.27 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Marathon and BPT is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay and Marathon Petroleum 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 Marathon Petroleum Corp are associated (or correlated) with BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and BP Prudhoe go up and down completely randomly.
Pair Corralation between Marathon Petroleum and BP Prudhoe
Considering the 90-day investment horizon Marathon Petroleum Corp is expected to generate 0.41 times more return on investment than BP Prudhoe. However, Marathon Petroleum Corp is 2.43 times less risky than BP Prudhoe. It trades about 0.09 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.04 per unit of risk. If you would invest 9,198 in Marathon Petroleum Corp on January 24, 2024 and sell it today you would earn a total of 10,627 from holding Marathon Petroleum Corp or generate 115.54% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Marathon Petroleum Corp vs. BP Prudhoe Bay
Performance |
| Timeline |
| Marathon Petroleum Corp |
| BP Prudhoe Bay |
Marathon Petroleum and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Marathon Petroleum and BP Prudhoe
The main advantage of trading using opposite Marathon Petroleum and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Marathon Petroleum position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Marathon Petroleum vs. Delek Logistics Partners | Marathon Petroleum vs. Crossamerica Partners LP | Marathon Petroleum vs. Sunoco LP |
| BP Prudhoe vs. Viper Energy Ut | BP Prudhoe vs. FLEX LNG | BP Prudhoe vs. Hess Midstream Partners | BP Prudhoe vs. NuStar Energy 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
Other Complementary Tools
| Commodity Channel Use Commodity Channel Index to analyze current equity momentum | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device |