Correlation Between Delek Logistics and CITGO

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

By analyzing existing cross correlation between Delek Logistics Partners and CITGO Petroleum 7, you can compare the effects of market volatilities on Delek Logistics and CITGO 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 Delek Logistics with a short position of CITGO. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delek Logistics and CITGO.

Diversification Opportunities for Delek Logistics and CITGO

-0.15

Correlation Coefficient

Delek Logistics  CITGO

Good diversification

The 3 months correlation between Delek and CITGO is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and CITGO Petroleum 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CITGO Petroleum 7 and Delek Logistics 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 Delek Logistics Partners are associated (or correlated) with CITGO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CITGO Petroleum 7 has no effect on the direction of Delek Logistics i.e., Delek Logistics and CITGO go up and down completely randomly.

Pair Corralation between Delek Logistics and CITGO

Considering the 90-day investment horizon Delek Logistics Partners is expected to generate 10.26 times more return on investment than CITGO. However, Delek Logistics is 10.26 times more volatile than CITGO Petroleum 7. It trades about 0.0 of its potential returns per unit of risk. CITGO Petroleum 7 is currently generating about -0.02 per unit of risk. If you would invest  4,115  in Delek Logistics Partners on September 26, 2024 and sell it today you would lose (26.00) from holding Delek Logistics Partners or give up 0.63% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	69.84%
Values	Daily Returns

Delek Logistics Partners  vs.  CITGO Petroleum 7

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

CITGO Petroleum 7

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CITGO Petroleum 7 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, CITGO is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Delek Logistics and CITGO

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

The idea behind Delek Logistics Partners and CITGO Petroleum 7 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.