Correlation Between PBF Energy and Marathon Petroleum

Can any of the company-specific risk be diversified away by investing in both PBF Energy and Marathon Petroleum 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 PBF Energy and Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between PBF Energy and Marathon Petroleum Corp, you can compare the effects of market volatilities on PBF Energy and Marathon Petroleum 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 PBF Energy with a short position of Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of PBF Energy and Marathon Petroleum.

Diversification Opportunities for PBF Energy and Marathon Petroleum

0.41

Correlation Coefficient

PBF Energy  Marathon Petroleum

Very weak diversification

The 3 months correlation between PBF and Marathon is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding PBF Energy and Marathon Petroleum Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marathon Petroleum Corp and PBF Energy 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 PBF Energy are associated (or correlated) with Marathon Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marathon Petroleum Corp has no effect on the direction of PBF Energy i.e., PBF Energy and Marathon Petroleum go up and down completely randomly.

Pair Corralation between PBF Energy and Marathon Petroleum

Considering the 90-day investment horizon PBF Energy is expected to under-perform the Marathon Petroleum. In addition to that, PBF Energy is 1.63 times more volatile than Marathon Petroleum Corp. It trades about -0.14 of its total potential returns per unit of risk. Marathon Petroleum Corp is currently generating about -0.01 per unit of volatility. If you would invest  15,526  in Marathon Petroleum Corp on November 28, 2024 and sell it today you would lose (467.00) from holding Marathon Petroleum Corp or give up 3.01% of portfolio value over 90 days.

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

PBF Energy  vs.  Marathon Petroleum Corp

PBF Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Marathon Petroleum Corp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with PBF Energy and Marathon Petroleum

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

The idea behind PBF Energy and Marathon Petroleum Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.