Correlation Between Marathon Petroleum and Vertex Energy

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

Diversification Opportunities for Marathon Petroleum and Vertex Energy

0.5

Correlation Coefficient

Marathon Petroleum  Vertex Energy

Very weak diversification

The 3 months correlation between Marathon and Vertex is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and Vertex Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vertex Energy 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 Vertex Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vertex Energy has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Vertex Energy go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Vertex Energy

Considering the 90-day investment horizon Marathon Petroleum Corp is expected to generate 0.12 times more return on investment than Vertex Energy. However, Marathon Petroleum Corp is 8.2 times less risky than Vertex Energy. It trades about -0.07 of its potential returns per unit of risk. Vertex Energy is currently generating about -0.1 per unit of risk. If you would invest  16,009  in Marathon Petroleum Corp on September 15, 2024 and sell it today you would lose (1,453) from holding Marathon Petroleum Corp or give up 9.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	95.31%
Values	Daily Returns

Marathon Petroleum Corp  vs.  Vertex Energy

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 latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Vertex Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Vertex Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Marathon Petroleum and Vertex Energy

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

The idea behind Marathon Petroleum Corp and Vertex 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.