Correlation Between Par Pacific and Valero Energy

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

Diversification Opportunities for Par Pacific and Valero Energy

0.49

Correlation Coefficient

Par Pacific  Valero Energy

Very weak diversification

The 3 months correlation between Par and Valero is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy 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 Valero Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valero Energy has no effect on the direction of Par Pacific i.e., Par Pacific and Valero Energy go up and down completely randomly.

Pair Corralation between Par Pacific and Valero Energy

Given the investment horizon of 90 days Par Pacific Holdings is expected to under-perform the Valero Energy. In addition to that, Par Pacific is 1.45 times more volatile than Valero Energy. It trades about -0.1 of its total potential returns per unit of risk. Valero Energy is currently generating about -0.03 per unit of volatility. If you would invest  15,177  in Valero Energy on August 30, 2024 and sell it today you would lose (1,321) from holding Valero Energy or give up 8.7% of portfolio value over 90 days.

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

Par Pacific Holdings  vs.  Valero Energy

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 December 2024. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Valero Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Par Pacific and Valero Energy

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

The idea behind Par Pacific Holdings and Valero 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.

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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.