Correlation Between Valero Energy and HF SINCLAIR

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

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

Diversification Opportunities for Valero Energy and HF SINCLAIR

0.42

Correlation Coefficient

Valero Energy  HF SINCLAIR

Very weak diversification

The 3 months correlation between Valero and HL80 is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and HF SINCLAIR P in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF SINCLAIR P and Valero 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 Valero Energy are associated (or correlated) with HF SINCLAIR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HF SINCLAIR P has no effect on the direction of Valero Energy i.e., Valero Energy and HF SINCLAIR go up and down completely randomly.

Pair Corralation between Valero Energy and HF SINCLAIR

Assuming the 90 days horizon Valero Energy is expected to generate 1.0 times more return on investment than HF SINCLAIR. However, Valero Energy is 1.0 times more volatile than HF SINCLAIR P. It trades about -0.07 of its potential returns per unit of risk. HF SINCLAIR P is currently generating about -0.14 per unit of risk. If you would invest  14,091  in Valero Energy on September 26, 2024 and sell it today you would lose (2,691) from holding Valero Energy or give up 19.1% of portfolio value over 90 days.

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

Valero Energy  vs.  HF SINCLAIR P

Valero Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Valero Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Valero Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

HF SINCLAIR P

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF SINCLAIR P 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.

Pair Trading with Valero Energy and HF SINCLAIR

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

The idea behind Valero Energy and HF SINCLAIR P 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.