Correlation Between Par Pacific and Adams Resources

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

By analyzing existing cross correlation between Par Pacific Holdings and Adams Resources Energy, you can compare the effects of market volatilities on Par Pacific and Adams Resources 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 Par Pacific with a short position of Adams Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Par Pacific and Adams Resources.

Diversification Opportunities for Par Pacific and Adams Resources

-0.1

Correlation Coefficient

Par Pacific  Adams Resources

Good diversification

The 3 months correlation between Par and Adams is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Adams Resources Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Adams Resources Energy and Par Pacific 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 Par Pacific Holdings are associated (or correlated) with Adams Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Adams Resources Energy has no effect on the direction of Par Pacific i.e., Par Pacific and Adams Resources go up and down completely randomly.

Pair Corralation between Par Pacific and Adams Resources

Given the investment horizon of 90 days Par Pacific Holdings is expected to under-perform the Adams Resources. In addition to that, Par Pacific is 6.99 times more volatile than Adams Resources Energy. It trades about -0.03 of its total potential returns per unit of risk. Adams Resources Energy is currently generating about 0.13 per unit of volatility. If you would invest  3,735  in Adams Resources Energy on December 27, 2024 and sell it today you would earn a total of  63.00  from holding Adams Resources Energy or generate 1.69% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	42.62%
Values	Daily Returns

Par Pacific Holdings  vs.  Adams Resources Energy

Par Pacific Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Par Pacific Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Par Pacific is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Adams Resources Energy

Risk-Adjusted Performance

OK

Over the last 90 days Adams Resources Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Adams Resources is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Par Pacific and Adams Resources

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

The idea behind Par Pacific Holdings and Adams Resources 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.