Correlation Between Marathon Petroleum and Phillips

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

By analyzing existing cross correlation between Marathon Petroleum and Phillips 66, you can compare the effects of market volatilities on Marathon Petroleum and Phillips 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 Phillips. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and Phillips.

Diversification Opportunities for Marathon Petroleum and Phillips

-0.06

Correlation Coefficient

Marathon Petroleum  Phillips

Good diversification

The 3 months correlation between Marathon and Phillips is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum and Phillips 66 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Phillips 66 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 Phillips. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Phillips 66 has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Phillips go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Phillips

Assuming the 90 days trading horizon Marathon Petroleum is expected to generate 0.81 times more return on investment than Phillips. However, Marathon Petroleum is 1.24 times less risky than Phillips. It trades about 0.06 of its potential returns per unit of risk. Phillips 66 is currently generating about 0.04 per unit of risk. If you would invest  61,970  in Marathon Petroleum on September 29, 2024 and sell it today you would earn a total of  27,220  from holding Marathon Petroleum or generate 43.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	91.71%
Values	Daily Returns

Marathon Petroleum  vs.  Phillips 66

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.

Phillips 66

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Phillips 66 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Phillips 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 Phillips

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

The idea behind Marathon Petroleum and Phillips 66 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.