Correlation Between Crossamerica Partners and Valero Energy

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

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

Diversification Opportunities for Crossamerica Partners and Valero Energy

-0.22

Correlation Coefficient

Crossamerica Partners  Valero Energy

Very good diversification

The 3 months correlation between Crossamerica and Valero is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Crossamerica Partners LP and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Crossamerica Partners 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 Crossamerica Partners LP 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 Crossamerica Partners i.e., Crossamerica Partners and Valero Energy go up and down completely randomly.

Pair Corralation between Crossamerica Partners and Valero Energy

Given the investment horizon of 90 days Crossamerica Partners LP is expected to generate 0.71 times more return on investment than Valero Energy. However, Crossamerica Partners LP is 1.4 times less risky than Valero Energy. It trades about 0.08 of its potential returns per unit of risk. Valero Energy is currently generating about -0.03 per unit of risk. If you would invest  1,917  in Crossamerica Partners LP on August 30, 2024 and sell it today you would earn a total of  121.00  from holding Crossamerica Partners LP or generate 6.31% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.44%
Values	Daily Returns

Crossamerica Partners LP  vs.  Valero Energy

Crossamerica Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Crossamerica Partners LP are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting basic indicators, Crossamerica Partners may actually be approaching a critical reversion point that can send shares even higher in December 2024.

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 Crossamerica Partners and Valero Energy

The main advantage of trading using opposite Crossamerica Partners and Valero Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Crossamerica Partners 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 Crossamerica Partners LP 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.

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