Correlation Between Par Pacific and Marathon Petroleum

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

By analyzing existing cross correlation between Par Pacific Holdings and Marathon Petroleum Corp, you can compare the effects of market volatilities on Par Pacific and Marathon Petroleum 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 Par Pacific with a short position of Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Par Pacific and Marathon Petroleum.

Diversification Opportunities for Par Pacific and Marathon Petroleum

0.87

Correlation Coefficient

Par Pacific  Marathon Petroleum

Very poor diversification

The 3 months correlation between Par and Marathon is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Marathon Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum Corp and Par Pacific 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 Par Pacific Holdings are associated (or correlated) with Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum Corp has no effect on the direction of Par Pacific i.e., Par Pacific and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Par Pacific and Marathon Petroleum

Given the investment horizon of 90 days Par Pacific Holdings is expected to generate 2.08 times more return on investment than Marathon Petroleum. However, Par Pacific is 2.08 times more volatile than Marathon Petroleum Corp. It trades about 0.19 of its potential returns per unit of risk. Marathon Petroleum Corp is currently generating about 0.31 per unit of risk. If you would invest  1,582  in Par Pacific Holdings on September 4, 2024 and sell it today you would earn a total of  184.00  from holding Par Pacific Holdings or generate 11.63% return on investment over 90 days.

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

Par Pacific Holdings  vs.  Marathon Petroleum Corp

Par Pacific Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with conflicting 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.

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.

Pair Trading with Par Pacific and Marathon Petroleum

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

The idea behind Par Pacific Holdings and Marathon Petroleum Corp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .