Correlation Between Par Pacific and CVR Energy

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

Diversification Opportunities for Par Pacific and CVR Energy

0.33

Correlation Coefficient

Par Pacific  CVR Energy

Weak diversification

The 3 months correlation between Par and CVR is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR 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 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 Par Pacific i.e., Par Pacific and CVR Energy go up and down completely randomly.

Pair Corralation between Par Pacific and CVR Energy

Given the investment horizon of 90 days Par Pacific Holdings is expected to under-perform the CVR Energy. In addition to that, Par Pacific is 1.12 times more volatile than CVR Energy. It trades about -0.06 of its total potential returns per unit of risk. CVR Energy is currently generating about 0.06 per unit of volatility. If you would invest  1,829  in CVR Energy on December 26, 2024 and sell it today you would earn a total of  174.00  from holding CVR Energy or generate 9.51% return on investment over 90 days.

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

Par Pacific Holdings  vs.  CVR 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 conflicting performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

CVR Energy

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Par Pacific and CVR Energy

The main advantage of trading using opposite Par Pacific and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Par Pacific 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 Par Pacific Holdings 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 Global Correlations module to find global opportunities by holding instruments from different markets.