Correlation Between HF Sinclair and Davis Commodities

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

Diversification Opportunities for HF Sinclair and Davis Commodities

0.07

Correlation Coefficient

HF Sinclair  Davis Commodities

Significant diversification

The 3 months correlation between DINO and Davis is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and Davis Commodities Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Davis Commodities 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 Davis Commodities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Davis Commodities has no effect on the direction of HF Sinclair i.e., HF Sinclair and Davis Commodities go up and down completely randomly.

Pair Corralation between HF Sinclair and Davis Commodities

Given the investment horizon of 90 days HF Sinclair Corp is expected to under-perform the Davis Commodities. But the stock apears to be less risky and, when comparing its historical volatility, HF Sinclair Corp is 4.03 times less risky than Davis Commodities. The stock trades about -0.32 of its potential returns per unit of risk. The Davis Commodities Limited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  92.00  in Davis Commodities Limited on October 6, 2024 and sell it today you would earn a total of  17.00  from holding Davis Commodities Limited or generate 18.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

HF Sinclair Corp  vs.  Davis Commodities Limited

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 February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Davis Commodities

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Davis Commodities Limited are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Davis Commodities may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with HF Sinclair and Davis Commodities

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

The idea behind HF Sinclair Corp and Davis Commodities Limited 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.