Correlation Between United States and SUNOCO

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

By analyzing existing cross correlation between United States Steel and SUNOCO LOGISTICS PARTNERS, you can compare the effects of market volatilities on United States and SUNOCO 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 United States with a short position of SUNOCO. Check out your portfolio center. Please also check ongoing floating volatility patterns of United States and SUNOCO.

Diversification Opportunities for United States and SUNOCO

0.4

Correlation Coefficient

United States  SUNOCO

Very weak diversification

The 3 months correlation between United and SUNOCO is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel and SUNOCO LOGISTICS PARTNERS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SUNOCO LOGISTICS PARTNERS and United States 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 United States Steel are associated (or correlated) with SUNOCO. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SUNOCO LOGISTICS PARTNERS has no effect on the direction of United States i.e., United States and SUNOCO go up and down completely randomly.

Pair Corralation between United States and SUNOCO

Taking into account the 90-day investment horizon United States Steel is expected to generate 1.67 times more return on investment than SUNOCO. However, United States is 1.67 times more volatile than SUNOCO LOGISTICS PARTNERS. It trades about -0.07 of its potential returns per unit of risk. SUNOCO LOGISTICS PARTNERS is currently generating about -0.4 per unit of risk. If you would invest  3,526  in United States Steel on October 11, 2024 and sell it today you would lose (248.00) from holding United States Steel or give up 7.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	76.19%
Values	Daily Returns

United States Steel  vs.  SUNOCO LOGISTICS PARTNERS

United States Steel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United States Steel has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

SUNOCO LOGISTICS PARTNERS

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SUNOCO LOGISTICS PARTNERS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for SUNOCO LOGISTICS PARTNERS investors.

Pair Trading with United States and SUNOCO

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

The idea behind United States Steel and SUNOCO LOGISTICS PARTNERS 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.