Correlation Between Marathon Petroleum and Hotis Othon

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

By analyzing existing cross correlation between Marathon Petroleum and Hotis Othon SA, you can compare the effects of market volatilities on Marathon Petroleum and Hotis Othon 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 Hotis Othon. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and Hotis Othon.

Diversification Opportunities for Marathon Petroleum and Hotis Othon

-0.46

Correlation Coefficient

Marathon Petroleum  Hotis Othon

Very good diversification

The 3 months correlation between Marathon and Hotis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum and Hotis Othon SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hotis Othon SA 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 are associated (or correlated) with Hotis Othon. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hotis Othon SA has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Hotis Othon go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Hotis Othon

Assuming the 90 days trading horizon Marathon Petroleum is expected to generate 0.36 times more return on investment than Hotis Othon. However, Marathon Petroleum is 2.76 times less risky than Hotis Othon. It trades about 0.33 of its potential returns per unit of risk. Hotis Othon SA is currently generating about 0.11 per unit of risk. If you would invest  83,979  in Marathon Petroleum on September 5, 2024 and sell it today you would earn a total of  7,521  from holding Marathon Petroleum or generate 8.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

Marathon Petroleum  vs.  Hotis Othon SA

Marathon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hotis Othon SA

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hotis Othon SA are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Hotis Othon may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Marathon Petroleum and Hotis Othon

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

The idea behind Marathon Petroleum and Hotis Othon SA 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.

Check out your portfolio center.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.