Correlation Between Reliance Industries and Marathon Petroleum

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Can any of the company-specific risk be diversified away by investing in both Reliance Industries 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 Reliance Industries and Marathon Petroleum into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Reliance Industries Limited and Marathon Petroleum Corp, you can compare the effects of market volatilities on Reliance Industries 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 Reliance Industries with a short position of Marathon Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Reliance Industries and Marathon Petroleum.

Diversification Opportunities for Reliance Industries and Marathon Petroleum

0.3
  Correlation Coefficient

Weak diversification

The 3 months correlation between Reliance and Marathon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Reliance Industries Limited 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 Reliance Industries 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 Reliance Industries Limited 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 Reliance Industries i.e., Reliance Industries and Marathon Petroleum go up and down completely randomly.

Pair Corralation between Reliance Industries and Marathon Petroleum

Assuming the 90 days horizon Reliance Industries Limited is expected to generate 0.78 times more return on investment than Marathon Petroleum. However, Reliance Industries Limited is 1.28 times less risky than Marathon Petroleum. It trades about 0.02 of its potential returns per unit of risk. Marathon Petroleum Corp is currently generating about 0.0 per unit of risk. If you would invest  5,180  in Reliance Industries Limited on September 23, 2024 and sell it today you would earn a total of  260.00  from holding Reliance Industries Limited or generate 5.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Reliance Industries Limited  vs.  Marathon Petroleum Corp

 Performance 
       Timeline  
Reliance Industries 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Reliance Industries Limited 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.
Marathon Petroleum Corp 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
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.

Reliance Industries and Marathon Petroleum Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Reliance Industries and Marathon Petroleum

The main advantage of trading using opposite Reliance Industries and Marathon Petroleum positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Reliance Industries 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 Reliance Industries Limited 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.

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