Correlation Between REX American and Marathon Petroleum
Can any of the company-specific risk be diversified away by investing in both REX American 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 REX American and Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between REX American Resources and Marathon Petroleum Corp, you can compare the effects of market volatilities on REX American 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 REX American with a short position of Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of REX American and Marathon Petroleum.
Diversification Opportunities for REX American and Marathon Petroleum
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between REX and Marathon is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding REX American Resources 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 REX American 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 REX American Resources 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 REX American i.e., REX American and Marathon Petroleum go up and down completely randomly.
Pair Corralation between REX American and Marathon Petroleum
Considering the 90-day investment horizon REX American Resources is expected to generate 4.74 times more return on investment than Marathon Petroleum. However, REX American is 4.74 times more volatile than Marathon Petroleum Corp. It trades about 0.16 of its potential returns per unit of risk. Marathon Petroleum Corp is currently generating about -0.03 per unit of risk. If you would invest 4,523 in REX American Resources on January 21, 2024 and sell it today you would earn a total of 1,101 from holding REX American Resources or generate 24.34% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
REX American Resources vs. Marathon Petroleum Corp
Performance |
| Timeline |
| REX American Resources |
| Marathon Petroleum Corp |
REX American and Marathon Petroleum Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with REX American and Marathon Petroleum
The main advantage of trading using opposite REX American and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REX American 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.| REX American vs. Innospec | REX American vs. H B Fuller | REX American vs. Quaker Chemical | REX American vs. Minerals Technologies |
| Marathon Petroleum vs. Delek Logistics Partners | Marathon Petroleum vs. Crossamerica Partners LP | Marathon Petroleum vs. Sunoco LP |
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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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