Correlation Between Marathon Petroleum and GENERAL

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

Diversification Opportunities for Marathon Petroleum and GENERAL

0.52

Correlation Coefficient

Marathon Petroleum  GENERAL

Very weak diversification

The 3 months correlation between Marathon and GENERAL is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and GENERAL ELEC CAP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GENERAL ELEC CAP 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 GENERAL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GENERAL ELEC CAP has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and GENERAL go up and down completely randomly.

Pair Corralation between Marathon Petroleum and GENERAL

Considering the 90-day investment horizon Marathon Petroleum Corp is expected to generate 2.15 times more return on investment than GENERAL. However, Marathon Petroleum is 2.15 times more volatile than GENERAL ELEC CAP. It trades about -0.01 of its potential returns per unit of risk. GENERAL ELEC CAP is currently generating about -0.21 per unit of risk. If you would invest  19,775  in Marathon Petroleum Corp on January 20, 2024 and sell it today you would lose (137.00) from holding Marathon Petroleum Corp or give up 0.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	36.36%
Values	Daily Returns

Marathon Petroleum Corp  vs.  GENERAL ELEC CAP

Marathon Petroleum Corp

Risk-Adjusted Performance

18 of 100

Very Weak

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.

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marathon Petroleum and GENERAL

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

The idea behind Marathon Petroleum Corp and GENERAL ELEC CAP 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.