Correlation Between Marathon Petroleum and Blue Dolphin

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

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

Diversification Opportunities for Marathon Petroleum and Blue Dolphin

-0.75

Correlation Coefficient

Marathon Petroleum  Blue Dolphin

Pay attention - limited upside

The 3 months correlation between Marathon and Blue is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and Blue Dolphin Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blue Dolphin Energy 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 Corp are associated (or correlated) with Blue Dolphin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blue Dolphin Energy has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Blue Dolphin go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Blue Dolphin

Considering the 90-day investment horizon Marathon Petroleum is expected to generate 23.38 times less return on investment than Blue Dolphin. But when comparing it to its historical volatility, Marathon Petroleum Corp is 4.3 times less risky than Blue Dolphin. It trades about 0.03 of its potential returns per unit of risk. Blue Dolphin Energy is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  146.00  in Blue Dolphin Energy on September 28, 2024 and sell it today you would earn a total of  460.00  from holding Blue Dolphin Energy or generate 315.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.42%
Values	Daily Returns

Marathon Petroleum Corp  vs.  Blue Dolphin Energy

Marathon Petroleum Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Marathon Petroleum Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Blue Dolphin Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blue Dolphin Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, Blue Dolphin is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Marathon Petroleum and Blue Dolphin

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

The idea behind Marathon Petroleum Corp and Blue Dolphin 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.

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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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.