Correlation Between Marathon Petroleum and KLA

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

By analyzing existing cross correlation between Marathon Petroleum and KLA Corporation, you can compare the effects of market volatilities on Marathon Petroleum and KLA 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 Marathon Petroleum with a short position of KLA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and KLA.

Diversification Opportunities for Marathon Petroleum and KLA

0.54

Correlation Coefficient

Marathon Petroleum  KLA

Very weak diversification

The 3 months correlation between Marathon and KLA is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum and KLA Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KLA Corporation and Marathon Petroleum 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 Marathon Petroleum are associated (or correlated) with KLA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KLA Corporation has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and KLA go up and down completely randomly.

Pair Corralation between Marathon Petroleum and KLA

Assuming the 90 days trading horizon Marathon Petroleum is expected to under-perform the KLA. In addition to that, Marathon Petroleum is 1.11 times more volatile than KLA Corporation. It trades about -0.14 of its total potential returns per unit of risk. KLA Corporation is currently generating about 0.1 per unit of volatility. If you would invest  98,675  in KLA Corporation on October 8, 2024 and sell it today you would earn a total of  2,603  from holding KLA Corporation or generate 2.64% return on investment over 90 days.

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

Marathon Petroleum  vs.  KLA Corp.

Marathon Petroleum

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Petroleum has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

KLA Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KLA Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, KLA is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Marathon Petroleum and KLA

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

The idea behind Marathon Petroleum and KLA Corporation 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.