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 Corp, 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

0.52

Correlation Coefficient

Valero Energy  HF Sinclair

Very weak diversification

The 3 months correlation between Valero and DINO is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Valero Energy and HF Sinclair Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HF Sinclair Corp 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 Corp 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

Considering the 90-day investment horizon Valero Energy is expected to generate 0.91 times more return on investment than HF Sinclair. However, Valero Energy is 1.1 times less risky than HF Sinclair. It trades about -0.03 of its potential returns per unit of risk. HF Sinclair Corp is currently generating about -0.11 per unit of risk. If you would invest  14,562  in Valero Energy on August 30, 2024 and sell it today you would lose (706.00) from holding Valero Energy or give up 4.85% 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 Corp

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. In spite of very healthy essential indicators, Valero Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

HF Sinclair Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days HF Sinclair Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in December 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

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 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.

Check out your portfolio center.

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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.