Correlation Between HF Sinclair and Adams Resources

Can any of the company-specific risk be diversified away by investing in both HF Sinclair and Adams Resources 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 HF Sinclair and Adams Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for HF Sinclair and Adams Resources

0.15

Correlation Coefficient

HF Sinclair  Adams Resources

Average diversification

The 3 months correlation between DINO and Adams is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and HF Sinclair 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 HF Sinclair Corp are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of HF Sinclair i.e., HF Sinclair and Adams Resources go up and down completely randomly.

Pair Corralation between HF Sinclair and Adams Resources

Given the investment horizon of 90 days HF Sinclair is expected to generate 2.8 times less return on investment than Adams Resources. In addition to that, HF Sinclair is 5.04 times more volatile than Adams Resources Energy. It trades about 0.01 of its total potential returns per unit of risk. Adams Resources Energy is currently generating about 0.13 per unit of volatility. If you would invest  3,735  in Adams Resources Energy on December 27, 2024 and sell it today you would earn a total of  63.00  from holding Adams Resources Energy or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	43.33%
Values	Daily Returns

HF Sinclair Corp  vs.  Adams Resources Energy

HF Sinclair Corp

Risk-Adjusted Performance

Very Weak

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

Adams Resources Energy

Risk-Adjusted Performance

OK

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with HF Sinclair and Adams Resources

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

The idea behind HF Sinclair Corp and Adams Resources 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.