Correlation Between CVR Energy and Marathon Petroleum

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

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

Diversification Opportunities for CVR Energy and Marathon Petroleum

0.77

Correlation Coefficient

CVR Energy  Marathon Petroleum

Poor diversification

The 3 months correlation between CVR and Marathon is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy 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 CVR 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 CVR Energy 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 CVR Energy i.e., CVR Energy and Marathon Petroleum go up and down completely randomly.

Pair Corralation between CVR Energy and Marathon Petroleum

Considering the 90-day investment horizon CVR Energy is expected to under-perform the Marathon Petroleum. In addition to that, CVR Energy is 1.2 times more volatile than Marathon Petroleum Corp. It trades about -0.19 of its total potential returns per unit of risk. Marathon Petroleum Corp is currently generating about 0.01 per unit of volatility. If you would invest  19,983  in Marathon Petroleum Corp on January 25, 2024 and sell it today you would lose (18.00) from holding Marathon Petroleum Corp or give up 0.09% of portfolio value over 90 days.

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

CVR Energy  vs.  Marathon Petroleum Corp

CVR Energy

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Marathon Petroleum Corp

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 18 (%) 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 CVR Energy and Marathon Petroleum

The main advantage of trading using opposite CVR Energy and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVR Energy 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 CVR Energy 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.