Correlation Between Sinopec Shanghai and Marathon Petroleum

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

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

Diversification Opportunities for Sinopec Shanghai and Marathon Petroleum

0.0

Correlation Coefficient

Sinopec Shanghai  Marathon Petroleum

Pay attention - limited upside

The 3 months correlation between Sinopec and Marathon is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sinopec Shanghai Petrochemical 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 Sinopec Shanghai 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 Sinopec Shanghai Petrochemical 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 Sinopec Shanghai i.e., Sinopec Shanghai and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Sinopec Shanghai and Marathon Petroleum

If you would invest  14,202  in Marathon Petroleum Corp on February 6, 2024 and sell it today you would earn a total of  4,201  from holding Marathon Petroleum Corp or generate 29.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Sinopec Shanghai Petrochemical  vs.  Marathon Petroleum Corp

Sinopec Shanghai Pet

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sinopec Shanghai Petrochemical has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical indicators, Sinopec Shanghai is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Marathon Petroleum Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Marathon Petroleum may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Sinopec Shanghai and Marathon Petroleum

The main advantage of trading using opposite Sinopec Shanghai and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sinopec Shanghai 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 Sinopec Shanghai Petrochemical 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.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.