Correlation Between Par Pacific and Valvoline

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

Diversification Opportunities for Par Pacific and Valvoline

0.4

Correlation Coefficient

Par Pacific  Valvoline

Very weak diversification

The 3 months correlation between Par and Valvoline is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Par Pacific Holdings and Valvoline in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valvoline 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 Valvoline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valvoline has no effect on the direction of Par Pacific i.e., Par Pacific and Valvoline go up and down completely randomly.

Pair Corralation between Par Pacific and Valvoline

Given the investment horizon of 90 days Par Pacific Holdings is expected to under-perform the Valvoline. In addition to that, Par Pacific is 1.9 times more volatile than Valvoline. It trades about -0.04 of its total potential returns per unit of risk. Valvoline is currently generating about -0.02 per unit of volatility. If you would invest  3,624  in Valvoline on December 28, 2024 and sell it today you would lose (114.00) from holding Valvoline or give up 3.15% of portfolio value over 90 days.

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

Par Pacific Holdings  vs.  Valvoline

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 latest conflicting performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Valvoline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valvoline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Valvoline is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Par Pacific and Valvoline

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

The idea behind Par Pacific Holdings and Valvoline 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.