Correlation Between Marathon Petroleum and Ampol

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

Diversification Opportunities for Marathon Petroleum and Ampol

0.76

Correlation Coefficient

Marathon Petroleum  Ampol

Poor diversification

The 3 months correlation between Marathon and Ampol is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and Ampol Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol Ltd ADR 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol Ltd ADR has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Ampol go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Ampol

Considering the 90-day investment horizon Marathon Petroleum Corp is expected to under-perform the Ampol. In addition to that, Marathon Petroleum is 1.02 times more volatile than Ampol Ltd ADR. It trades about -0.12 of its total potential returns per unit of risk. Ampol Ltd ADR is currently generating about -0.09 per unit of volatility. If you would invest  3,907  in Ampol Ltd ADR on September 17, 2024 and sell it today you would lose (457.00) from holding Ampol Ltd ADR or give up 11.7% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Marathon Petroleum Corp  vs.  Ampol Ltd ADR

Marathon Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Ampol Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Marathon Petroleum and Ampol

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

The idea behind Marathon Petroleum Corp and Ampol Ltd ADR 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.