Correlation Between Marathon Petroleum and CVR Energy

Can any of the company-specific risk be diversified away by investing in both Marathon Petroleum and CVR 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 Marathon Petroleum and CVR Energy 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 CVR Energy, you can compare the effects of market volatilities on Marathon Petroleum and CVR 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 Marathon Petroleum with a short position of CVR Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Marathon Petroleum and CVR Energy.

Diversification Opportunities for Marathon Petroleum and CVR Energy

0.58

Correlation Coefficient

Marathon Petroleum  CVR Energy

Very weak diversification

The 3 months correlation between Marathon and CVR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR 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 CVR Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVR Energy has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and CVR Energy go up and down completely randomly.

Pair Corralation between Marathon Petroleum and CVR Energy

Considering the 90-day investment horizon Marathon Petroleum is expected to generate 1.06 times less return on investment than CVR Energy. But when comparing it to its historical volatility, Marathon Petroleum Corp is 1.4 times less risky than CVR Energy. It trades about 0.08 of its potential returns per unit of risk. CVR Energy is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,856  in CVR Energy on December 28, 2024 and sell it today you would earn a total of  158.00  from holding CVR Energy or generate 8.51% return on investment over 90 days.

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

Marathon Petroleum Corp  vs.  CVR Energy

Marathon Petroleum Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, Marathon Petroleum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Marathon Petroleum and CVR Energy

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

The idea behind Marathon Petroleum Corp and CVR 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.