Correlation Between Motor Oil and Sunoco LP

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

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

Diversification Opportunities for Motor Oil and Sunoco LP

0.08

Correlation Coefficient

Motor Oil  Sunoco LP

Significant diversification

The 3 months correlation between Motor and Sunoco is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Motor Oil Hellas and Sunoco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sunoco LP and Motor Oil 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 Motor Oil Hellas are associated (or correlated) with Sunoco LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sunoco LP has no effect on the direction of Motor Oil i.e., Motor Oil and Sunoco LP go up and down completely randomly.

Pair Corralation between Motor Oil and Sunoco LP

If you would invest  3,772  in Sunoco LP on January 26, 2024 and sell it today you would earn a total of  1,866  from holding Sunoco LP or generate 49.47% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Motor Oil Hellas  vs.  Sunoco LP

Motor Oil Hellas

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days Motor Oil Hellas has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly weak fundamental indicators, Motor Oil may actually be approaching a critical reversion point that can send shares even higher in May 2024.

Sunoco LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sunoco LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Sunoco LP is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Motor Oil and Sunoco LP

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

The idea behind Motor Oil Hellas and Sunoco 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.