Correlation Between Crossamerica Partners and Marathon Petroleum

Can any of the company-specific risk be diversified away by investing in both Crossamerica Partners 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 Crossamerica Partners and Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Crossamerica Partners and Marathon Petroleum

0.2

Correlation Coefficient

Crossamerica Partners  Marathon Petroleum

Modest diversification

The 3 months correlation between Crossamerica and Marathon is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Crossamerica Partners LP 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 Crossamerica Partners 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 Crossamerica Partners LP 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 Crossamerica Partners i.e., Crossamerica Partners and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Crossamerica Partners and Marathon Petroleum

Given the investment horizon of 90 days Crossamerica Partners is expected to generate 2.95 times less return on investment than Marathon Petroleum. But when comparing it to its historical volatility, Crossamerica Partners LP is 1.26 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 0.1 of returns per unit of risk over similar time horizon. If you would invest  12,337  in Marathon Petroleum Corp on January 17, 2024 and sell it today you would earn a total of  8,049  from holding Marathon Petroleum Corp or generate 65.24% return on investment over 90 days.

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

Crossamerica Partners LP  vs.  Marathon Petroleum Corp

Crossamerica Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Crossamerica Partners LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Crossamerica Partners is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Marathon Petroleum Corp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Marathon Petroleum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Crossamerica Partners and Marathon Petroleum

The main advantage of trading using opposite Crossamerica Partners and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crossamerica Partners 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.

The idea behind Crossamerica Partners LP and Marathon Petroleum Corp 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 Stocks Directory module to find actively traded stocks across global markets.