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 Corp 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

0.84

Correlation Coefficient

Marathon Petroleum  Phillips

Very poor diversification

The 3 months correlation between Marathon and Phillips is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Marathon Petroleum Corp 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 Corp 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 horizon Marathon Petroleum Corp is expected to under-perform the Phillips. In addition to that, Marathon Petroleum is 1.13 times more volatile than Phillips 66. It trades about -0.09 of its total potential returns per unit of risk. Phillips 66 is currently generating about -0.07 per unit of volatility. If you would invest  11,657  in Phillips 66 on September 22, 2024 and sell it today you would lose (1,117) from holding Phillips 66 or give up 9.58% of portfolio value over 90 days.

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

Marathon Petroleum Corp  vs.  Phillips 66

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. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

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 Corp 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.