Correlation Between Valvoline and PBF Energy

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

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

Diversification Opportunities for Valvoline and PBF Energy

0.35

Correlation Coefficient

Valvoline  PBF Energy

Weak diversification

The 3 months correlation between Valvoline and PBF is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Valvoline and PBF Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PBF Energy and Valvoline 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 Valvoline are associated (or correlated) with PBF Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PBF Energy has no effect on the direction of Valvoline i.e., Valvoline and PBF Energy go up and down completely randomly.

Pair Corralation between Valvoline and PBF Energy

Considering the 90-day investment horizon Valvoline is expected to generate 0.49 times more return on investment than PBF Energy. However, Valvoline is 2.04 times less risky than PBF Energy. It trades about -0.02 of its potential returns per unit of risk. PBF Energy is currently generating about -0.1 per unit of risk. If you would invest  3,624  in Valvoline on December 28, 2024 and sell it today you would lose (96.00) from holding Valvoline or give up 2.65% of portfolio value over 90 days.

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

Valvoline  vs.  PBF Energy

Valvoline

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valvoline has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Valvoline is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

PBF Energy

Risk-Adjusted Performance

Very Weak

Over the last 90 days PBF Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Valvoline and PBF Energy

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

The idea behind Valvoline and PBF 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.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.