Correlation Between Delek Logistics and Valero Energy

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

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

Diversification Opportunities for Delek Logistics and Valero Energy

0.69

Correlation Coefficient

Delek Logistics  Valero Energy

Poor diversification

The 3 months correlation between Delek and Valero is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners and Valero Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valero Energy and Delek Logistics 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 Delek Logistics Partners 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 Delek Logistics i.e., Delek Logistics and Valero Energy go up and down completely randomly.

Pair Corralation between Delek Logistics and Valero Energy

Considering the 90-day investment horizon Delek Logistics is expected to generate 1.35 times less return on investment than Valero Energy. But when comparing it to its historical volatility, Delek Logistics Partners is 1.57 times less risky than Valero Energy. It trades about 0.11 of its potential returns per unit of risk. Valero Energy is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  11,862  in Valero Energy on December 28, 2024 and sell it today you would earn a total of  1,461  from holding Valero Energy or generate 12.32% return on investment over 90 days.

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

Delek Logistics Partners  vs.  Valero Energy

Delek Logistics Partners

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Delek Logistics Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent forward-looking signals, Delek Logistics may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Valero Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady essential indicators, Valero Energy displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Delek Logistics and Valero Energy

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

Check out your portfolio center.

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.