Correlation Between Titan Company and Marathon Petroleum

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

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

Diversification Opportunities for Titan Company and Marathon Petroleum

0.29

Correlation Coefficient

Titan Company  Marathon Petroleum

Modest diversification

The 3 months correlation between Titan and Marathon is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Titan Company Limited 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 Titan Company 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 Titan Company Limited 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 Titan Company i.e., Titan Company and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Titan Company and Marathon Petroleum

Assuming the 90 days trading horizon Titan Company Limited is expected to under-perform the Marathon Petroleum. But the stock apears to be less risky and, when comparing its historical volatility, Titan Company Limited is 1.54 times less risky than Marathon Petroleum. The stock trades about -0.12 of its potential returns per unit of risk. The Marathon Petroleum Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  15,728  in Marathon Petroleum Corp on September 3, 2024 and sell it today you would lose (1,072) from holding Marathon Petroleum Corp or give up 6.82% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.38%
Values	Daily Returns

Titan Company Limited  vs.  Marathon Petroleum Corp

Titan Limited

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Titan Company Limited 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 healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm 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. Despite nearly stable basic indicators, Marathon Petroleum is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Titan Company and Marathon Petroleum

The main advantage of trading using opposite Titan Company and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Titan Company 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 Titan Company Limited 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..