Correlation Between Blue Dolphin and PBF Energy

Can any of the company-specific risk be diversified away by investing in both Blue Dolphin and PBF 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 Blue Dolphin and PBF Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Blue Dolphin Energy and PBF Energy, you can compare the effects of market volatilities on Blue Dolphin and PBF 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 Blue Dolphin with a short position of PBF Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Dolphin and PBF Energy.

Diversification Opportunities for Blue Dolphin and PBF Energy

-0.37

Correlation Coefficient

Blue Dolphin  PBF Energy

Very good diversification

The 3 months correlation between Blue and PBF is -0.37. Overlapping area represents the amount of risk that can be diversified away by holding Blue Dolphin Energy and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF Energy and Blue Dolphin 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 Blue Dolphin Energy are associated (or correlated) with PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Blue Dolphin i.e., Blue Dolphin and PBF Energy go up and down completely randomly.

Pair Corralation between Blue Dolphin and PBF Energy

Given the investment horizon of 90 days Blue Dolphin Energy is expected to generate 2.89 times more return on investment than PBF Energy. However, Blue Dolphin is 2.89 times more volatile than PBF Energy. It trades about 0.18 of its potential returns per unit of risk. PBF Energy is currently generating about 0.01 per unit of risk. If you would invest  110.00  in Blue Dolphin Energy on August 26, 2024 and sell it today you would earn a total of  496.00  from holding Blue Dolphin Energy or generate 450.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	31.99%
Values	Daily Returns

Blue Dolphin Energy  vs.  PBF Energy

Blue Dolphin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

PBF Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, PBF Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Blue Dolphin and PBF Energy

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

The idea behind Blue Dolphin Energy and PBF 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.

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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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.