Correlation Between HF Sinclair and Natural Resource

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

Diversification Opportunities for HF Sinclair and Natural Resource

-0.28

Correlation Coefficient

HF Sinclair  Natural Resource

Very good diversification

The 3 months correlation between DINO and Natural is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding HF Sinclair Corp and Natural Resource Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Natural Resource Partners 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 Natural Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Natural Resource Partners has no effect on the direction of HF Sinclair i.e., HF Sinclair and Natural Resource go up and down completely randomly.

Pair Corralation between HF Sinclair and Natural Resource

Given the investment horizon of 90 days HF Sinclair is expected to generate 1.11 times less return on investment than Natural Resource. But when comparing it to its historical volatility, HF Sinclair Corp is 1.11 times less risky than Natural Resource. It trades about 0.01 of its potential returns per unit of risk. Natural Resource Partners is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  10,663  in Natural Resource Partners on December 28, 2024 and sell it today you would lose (63.00) from holding Natural Resource Partners or give up 0.59% of portfolio value over 90 days.

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

HF Sinclair Corp  vs.  Natural Resource Partners

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.

Natural Resource Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Natural Resource Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Natural Resource is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with HF Sinclair and Natural Resource

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

The idea behind HF Sinclair Corp and Natural Resource Partners 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..