Correlation Between Marathon Petroleum and REC

Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and REC 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 REC 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 REC, you can compare the effects of market volatilities on Marathon Petroleum and REC 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 REC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and REC.

Diversification Opportunities for Marathon Petroleum and REC

0.0

Correlation Coefficient

Marathon Petroleum  REC

Pay attention - limited upside

The 3 months correlation between Marathon and REC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and REC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on REC 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 REC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of REC has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and REC go up and down completely randomly.

Pair Corralation between Marathon Petroleum and REC

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	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Marathon Petroleum Corp  vs.  REC

Marathon Petroleum Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 19 (%) 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.

REC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days REC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, REC is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Marathon Petroleum and REC

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

The idea behind Marathon Petroleum Corp and REC 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.