Correlation Between Valero Energy and Ampol

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

By analyzing existing cross correlation between Valero Energy and Ampol Ltd ADR, you can compare the effects of market volatilities on Valero Energy and Ampol 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 Ampol. Check out your portfolio center. Please also check ongoing floating volatility patterns of Valero Energy and Ampol.

Diversification Opportunities for Valero Energy and Ampol

0.24

Correlation Coefficient

Valero Energy  Ampol

Modest diversification

The 3 months correlation between Valero and Ampol is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and Ampol Ltd ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ampol Ltd ADR 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 Ampol. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ampol Ltd ADR has no effect on the direction of Valero Energy i.e., Valero Energy and Ampol go up and down completely randomly.

Pair Corralation between Valero Energy and Ampol

Considering the 90-day investment horizon Valero Energy is expected to generate 0.6 times more return on investment than Ampol. However, Valero Energy is 1.66 times less risky than Ampol. It trades about 0.2 of its potential returns per unit of risk. Ampol Ltd ADR is currently generating about 0.02 per unit of risk. If you would invest  12,897  in Valero Energy on September 5, 2024 and sell it today you would earn a total of  850.00  from holding Valero Energy or generate 6.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Valero Energy  vs.  Ampol Ltd ADR

Valero Energy

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Valero Energy are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy essential indicators, Valero Energy is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Ampol Ltd ADR

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Ampol Ltd ADR has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Ampol is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Valero Energy and Ampol

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

The idea behind Valero Energy and Ampol Ltd ADR 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.