Correlation Between Sunoco LP and CVR Energy

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

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

Diversification Opportunities for Sunoco LP and CVR Energy

0.22

Correlation Coefficient

Sunoco LP  CVR Energy

Modest diversification

The 3 months correlation between Sunoco and CVR is 0.22. Overlapping area represents the amount of risk that can be diversified away by holding Sunoco LP and CVR Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVR Energy and Sunoco LP 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 Sunoco LP 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 Sunoco LP i.e., Sunoco LP and CVR Energy go up and down completely randomly.

Pair Corralation between Sunoco LP and CVR Energy

Considering the 90-day investment horizon Sunoco LP is expected to generate 0.4 times more return on investment than CVR Energy. However, Sunoco LP is 2.48 times less risky than CVR Energy. It trades about 0.19 of its potential returns per unit of risk. CVR Energy is currently generating about 0.06 per unit of risk. If you would invest  5,065  in Sunoco LP on December 27, 2024 and sell it today you would earn a total of  722.00  from holding Sunoco LP or generate 14.25% return on investment over 90 days.

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

Sunoco LP  vs.  CVR Energy

Sunoco LP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sunoco LP are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Sunoco LP displayed solid returns over the last few months and may actually be approaching a breakup point.

CVR Energy

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CVR Energy are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, CVR Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Sunoco LP and CVR Energy

The main advantage of trading using opposite Sunoco LP and CVR Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sunoco LP 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 Sunoco LP 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.