Correlation Between Sunoco LP and PBF Energy

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

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

Diversification Opportunities for Sunoco LP and PBF Energy

-0.25

Correlation Coefficient

Sunoco LP  PBF Energy

Very good diversification

The 3 months correlation between Sunoco and PBF is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Sunoco LP and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF Energy and Sunoco LP 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 Sunoco LP are associated (or correlated) with PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Sunoco LP i.e., Sunoco LP and PBF Energy go up and down completely randomly.

Pair Corralation between Sunoco LP and PBF Energy

Considering the 90-day investment horizon Sunoco LP is expected to generate 0.7 times more return on investment than PBF Energy. However, Sunoco LP is 1.43 times less risky than PBF Energy. It trades about 0.09 of its potential returns per unit of risk. PBF Energy is currently generating about 0.06 per unit of risk. If you would invest  4,307  in Sunoco LP on January 23, 2024 and sell it today you would earn a total of  1,283  from holding Sunoco LP or generate 29.79% return on investment over 90 days.

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

Sunoco LP  vs.  PBF Energy

Sunoco LP

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Sunoco LP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

PBF Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in PBF Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, PBF Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sunoco LP and PBF Energy

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

The idea behind Sunoco LP and PBF Energy 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.