Correlation Between Marathon Petroleum and Kunlun Energy

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

Diversification Opportunities for Marathon Petroleum and Kunlun Energy

-0.52

Correlation Coefficient

Marathon Petroleum  Kunlun Energy

Excellent diversification

The 3 months correlation between Marathon and Kunlun is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp and Kunlun Energy Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kunlun 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 Kunlun Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kunlun Energy has no effect on the direction of Marathon Petroleum i.e., Marathon Petroleum and Kunlun Energy go up and down completely randomly.

Pair Corralation between Marathon Petroleum and Kunlun Energy

Considering the 90-day investment horizon Marathon Petroleum Corp is expected to generate 0.69 times more return on investment than Kunlun Energy. However, Marathon Petroleum Corp is 1.45 times less risky than Kunlun Energy. It trades about 0.11 of its potential returns per unit of risk. Kunlun Energy Co is currently generating about -0.01 per unit of risk. If you would invest  13,262  in Marathon Petroleum Corp on December 20, 2024 and sell it today you would earn a total of  1,695  from holding Marathon Petroleum Corp or generate 12.78% return on investment over 90 days.

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

Marathon Petroleum Corp  vs.  Kunlun Energy Co

Marathon Petroleum Corp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Marathon Petroleum Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Marathon Petroleum exhibited solid returns over the last few months and may actually be approaching a breakup point.

Kunlun Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kunlun Energy Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong fundamental indicators, Kunlun Energy 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 Kunlun Energy

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

The idea behind Marathon Petroleum Corp and Kunlun Energy Co 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.