Correlation Between HF Sinclair and CVR Energy

Can any of the company-specific risk be diversified away by investing in both HF Sinclair and CVR 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 HF Sinclair and CVR Energy 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 CVR Energy, you can compare the effects of market volatilities on HF Sinclair and CVR 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 HF Sinclair with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of HF Sinclair and CVR Energy.

Diversification Opportunities for HF Sinclair and CVR Energy

0.85

Correlation Coefficient

HF Sinclair  CVR Energy

Very poor diversification

The 3 months correlation between DINO and CVR is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of HF Sinclair i.e., HF Sinclair and CVR Energy go up and down completely randomly.

Pair Corralation between HF Sinclair and CVR Energy

Given the investment horizon of 90 days HF Sinclair is expected to generate 3.68 times less return on investment than CVR Energy. But when comparing it to its historical volatility, HF Sinclair Corp is 1.79 times less risky than CVR Energy. It trades about 0.05 of its potential returns per unit of risk. CVR Energy is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,806  in CVR Energy on August 30, 2024 and sell it today you would earn a total of  121.00  from holding CVR Energy or generate 6.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.65%
Values	Daily Returns

HF Sinclair Corp  vs.  CVR Energy

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

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 conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in December 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with HF Sinclair and CVR Energy

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

The idea behind HF Sinclair Corp and CVR 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.