VLO

Valero's High-Vol Rally Delivers Asymmetric Gains Amid One Concentrated Vulnerability

Margin-driven alpha and strong upside capture contrast with a history of sharp drawdowns tied to crack-spread swings — margin compression is the principal near-term risk over the next 6-18 months.

Returns & Risk Profile • 2026-04-15

1

Returns Overview

Period returns, alpha, cumulative performance, distributions

2

Volatility Analysis

Annualized volatility, downside deviation, drawdowns

3

Beta & Correlation

Trailing, upside, downside beta, systematic risk

4

Risk-Adjusted Returns

Sharpe, Sortino, Calmar, Information, Treynor

5

Market Regime Analysis

Bull/bear behavior, capture ratios

6

Investment Highlights & Risk Summary

Executive summary, risk flags, rankings

Returns Overview

Valero Energy Corporation (VLO) — Return Performance

Valero Energy Corporation (VLO) delivered a mixed return profile over the past 5 years, markedly outperforming the Energy Select Sector SPDR (XLE) in most horizons. The stock posted a 270.99% total return over 5 years versus XLE's 100.31% (+170.68% relative alpha), while the 3‑year return was 120.46% versus XLE's 76.48% (+44.0% alpha). Short‑term performance was more volatile: a 1‑month loss of -4.65% generated a modest -11.38% alpha, but the 3‑month and 6‑month periods showed strong outperformance with alphas of 29.44% and 37.08% respectively, indicating a rebound after the recent dip.

Period Returns vs S&P 500 & XLE

Monthly Returns Heatmap

VLO

The company generated positive alpha in all periods beyond the 1‑month window, with the most pronounced outperformance in the 5‑year horizon (+170.68% vs. XLE). The short‑term dip suggests sensitivity to near‑term market swings, yet the rapid recovery and strong 3‑month (+29.85% vs. XLE's 20.25%) and 6‑month (+38.94% vs. XLE's 10.9%) gains highlight resilient demand for refined products. Overall, VLO stands out as a long‑term outperformer within the energy sector, delivering consistent excess returns relative to its benchmark.

Returns Overview

Valero Energy Corporation (VLO) — Return Charts

Volatility Analysis

Valero Energy Corporation (VLO) — Volatility Profile

Valero Energy Corporation (VLO) exhibits markedly higher volatility than the broader market, with an annualized volatility of 39.63% compared to the S&P 500’s 17.84%, indicating more than double the price swings. The downside risk profile is pronounced, as reflected by a downside deviation of 28.38% and a historical maximum drawdown of -71.88% that spanned roughly 21 months from June 2018 to March 2020, underscoring the potential for severe price declines. However, the trailing 60‑day (36.99%) and 252‑day (33.39%) volatilities are both below the long‑term average, suggesting a recent moderation in price turbulence. The full recovery from the deep drawdown was achieved by April 2022, demonstrating the stock’s capacity to rebound after extreme stress. Overall, while VLO’s risk metrics remain elevated relative to the benchmark, recent volatility compression and a completed recovery mitigate some concerns for risk‑aware investors.

Volatility Metrics

VLO

The company’s volatility stands at 39.63% annualized, more than twice the S&P 500’s 17.84%, indicating that investors should expect substantially larger price swings. Downside deviation of 28.38% signals that a large portion of this volatility is driven by negative moves, and the -71.88% max drawdown—lasting over a year and a half—highlights the depth of potential losses. Recent 60‑day and 252‑day volatilities of 36.99% and 33.39% are each lower than the long‑term average, reflecting a temporary easing of market stress. The drawdown was fully recovered by April 2022, showing that despite severe past declines, the stock can regain its prior levels, which softens the downside risk narrative.

VLO’s annualized volatility of 39.63% is more than double the S&P 500’s 17.84%, indicating heightened price fluctuation risk.
Downside deviation of 28.38% represents a large share of total volatility, emphasizing susceptibility to negative moves.
The maximum historical drawdown of -71.88% lasted approximately 21 months, demonstrating the potential for deep, prolonged losses.
Trailing 60‑day (36.99%) and 252‑day (33.39%) volatilities are below the long‑term average, suggesting recent volatility moderation.
The full recovery from the deepest drawdown was completed by April 2022, indicating resilience after extreme stress.

Positive Characteristics
Trailing volatilities have tapered below the long‑term average, reducing short‑term risk exposure.
The stock has successfully recovered from its historic drawdown, showing strong rebound capability.
Downside deviation, while high, is lower than the total volatility, implying that not all price swings are adverse.

Volatility Analysis

Valero Energy Corporation (VLO) — Volatility & Drawdown Charts

Beta & Correlation

Valero Energy Corporation (VLO) — Beta Profile

Valero Energy Corporation (VLO) exhibits a trailing beta of 1.093 versus the S&P 500, placing it squarely in the market‑like range (0.8‑1.2). This indicates that, on average, the stock moves slightly more than the broader market in both up and down markets, but it is not classified as aggressively volatile. The asymmetric beta profile—upside beta of 1.082 versus downside beta of 1.305—reveals a pronounced sensitivity to market declines, meaning losses tend to be amplified relative to gains during adverse market conditions. The low R‑squared of 0.242 and correlation of 0.492 with the S&P 500 suggest that only about 24% of VLO’s price movements are explained by overall market dynamics, leaving roughly three‑quarters driven by company‑specific factors. When benchmarked against the Energy sector (XLE), VLO’s sector beta of 1.008 indicates near‑parity with sector movements, while the sector correlation of 0.743 and sector R‑squared of 0.552 show that more than half of the stock’s variance is tied to sector trends. Comparing the market and sector betas demonstrates that VLO’s risk is split: roughly 24% systematic (market) risk versus 55% sector‑driven risk, with the remaining exposure stemming from idiosyncratic drivers. This decomposition helps investors understand that while VLO tracks the energy sector closely, it also retains a substantial component of company‑specific risk that can diversify away from broader market or sector moves.

Beta & Correlation Metrics

VLO

Valero’s market beta of 1.093 signals a modestly higher-than‑average reaction to S&P 500 swings, but the downside beta of 1.305 highlights a steeper decline during market downturns, an important consideration for risk‑averse investors. The sector beta of 1.008 suggests the stock moves almost in lockstep with the Energy sector, yet the higher sector R‑squared (0.552) indicates that sector dynamics explain more of VLO’s price behavior than the broad market does. Consequently, a portfolio seeking exposure to energy trends will capture much of VLO’s movement, while still benefiting from its sizable idiosyncratic component (75.8% of total variance).

Trailing market beta of 1.093 places VLO in the market‑like risk category, not overly defensive or aggressive.
Downside beta (1.305) exceeds upside beta (1.082), implying amplified losses relative to gains in volatile markets.
Only 24.2% of total variance is systematic (market) risk; 75.8% is idiosyncratic, indicating strong diversification potential.
Sector beta of 1.008 with sector R‑squared of 55.2% shows that sector movements account for more variance than the broader market.
Correlation with the S&P 500 (0.492) is modest, while correlation with the Energy sector (0.743) is substantially higher.

Positive Characteristics
Near‑parity sector beta (1.008) provides reliable exposure to energy‑sector trends.
High idiosyncratic risk component (75.8%) offers diversification benefits for portfolios heavily weighted to the broader market.
Upside beta close to 1 (1.082) indicates that the stock can capture market gains almost proportionally.

Beta & Correlation

Valero Energy Corporation (VLO) — Rolling Beta

Positive Notes

Near‑parity sector beta (1.008) provides reliable exposure to energy‑sector trends.

High idiosyncratic risk component (75.8%) offers diversification benefits for portfolios heavily weighted to the broader market.

Upside beta close to 1 (1.082) indicates that the stock can capture market gains almost proportionally.

Risk-Adjusted Returns

Valero Energy Corporation (VLO) — Risk-Adjusted Performance

Valero Energy Corporation (VLO) delivers modest risk-adjusted performance, with a Sharpe ratio of 0.544 indicating that total returns exceed the risk‑free rate by only about half a unit of total volatility. The Sortino ratio of 0.76, higher than the Sharpe, reveals that the stock’s downside volatility is lower than its overall volatility, suggesting a relatively favorable loss profile. However, the Calmar ratio of 0.351 and an Information ratio of 0.37 point to a pronounced drawdown history and only modest consistency in generating alpha relative to a benchmark, respectively. The Treynor ratio of 19.735, while unusually high, reflects strong return per unit of systematic (beta) risk, implying that the market‑related component of VLO’s performance has been generous.

Risk-free rate: 3.64% (Fed Funds Rate)

Risk-Adjusted Metrics

VLO

The Sharpe ratio of 0.544 places VLO below the threshold of 1.0 that investors typically consider satisfactory, signaling limited compensation for total risk. In contrast, the Sortino ratio of 0.76 exceeds the Sharpe, indicating that downside risk is less pronounced than overall volatility and that the stock’s loss‑side behavior is comparatively benign. The Calmar ratio of 0.351 suggests that the company’s peak‑to‑trough drawdown has been severe relative to its annualized return, a concern for investors sensitive to capital erosion. An Information ratio of 0.37 falls short of the 0.5 benchmark, implying that active management or the stock’s inherent alpha generation has been only modestly consistent. Nonetheless, the Treynor ratio of 19.735 demonstrates that VLO has delivered substantial excess return per unit of systematic risk, a positive sign for market‑exposed investors.

Sharpe ratio below 1.0 indicates modest total risk‑adjusted returns.
Sortino ratio exceeds Sharpe, highlighting a relatively favorable downside risk profile.
Calmar ratio of 0.351 reflects a high maximum drawdown relative to returns.
Information ratio under 0.5 suggests limited consistency in alpha generation.
Treynor ratio of 19.735 points to strong excess return per unit of systematic risk.

Positive Characteristics
Downside volatility is lower than overall volatility, as shown by the higher Sortino ratio.
Systematic risk‑adjusted return is strong, evidenced by the high Treynor ratio.

Risk-Adjusted Returns

Valero Energy Corporation (VLO) — Rolling Sharpe & Sortino

Positive Notes

Downside volatility is lower than overall volatility, as shown by the higher Sortino ratio.

Systematic risk‑adjusted return is strong, evidenced by the high Treynor ratio.

Market Regime Analysis

Valero Energy Corporation (VLO) — Regime Behavior

Across market regimes, the stock exhibits markedly higher average returns during bullish periods, especially when volatility is elevated. In the Bull-HighVol regime, the company delivers an average monthly gain of 3.18%, more than double its performance in the calm Bull-LowVol environment (1.43%). Notably, the firm also generates a respectable 4.25% average return in the Bear-LowVol regime, suggesting a degree of defensive resilience, while its performance deteriorates in Bear-HighVol periods, posting only 1.16% on average. The upside capture of 149.4% and downside capture of 107.4% translate into a capture ratio of 1.39, indicating that the stock captures substantially more upside than downside relative to the S&P 500, a favorable risk‑return profile.

Current Market Regime: Bull-HighVol

Bull-LowVol = calm uptrend • Bull-HighVol = volatile uptrend • Bear-LowVol = orderly decline • Bear-HighVol = crisis

Regime Returns & Capture Ratios

VLO

In bullish environments the stock thrives, delivering 3.18% average monthly returns when the market is both rising and volatile, reflecting strong exposure to upward price momentum. Its modest 1.43% return in Bull-LowVol suggests lower sensitivity when the market climbs smoothly. During orderly declines (Bear-LowVol), the company still posts a 4.25% average gain, highlighting defensive characteristics that can offset broader market weakness. However, in volatile down markets (Bear-HighVol) the average return falls to 1.16%, underscoring vulnerability when both price pressure and volatility are high. The upside capture of 149.4% versus a downside capture of 107.4% yields a capture ratio of 1.39, meaning the stock captures 39% more upside than downside relative to the index, a metric that investors view as a sign of asymmetric upside potential.

Market Regime Analysis

Valero Energy Corporation (VLO) — Regime & Capture Charts

Regime Timeline

The stock’s average return spikes to 3.18% in Bull-HighVol, indicating strong participation in volatile uptrends.
Even in Bear-LowVol, the company achieves a 4.25% average return, signaling defensive qualities uncommon for an energy firm.
Downside capture exceeds 100% (107.4%), suggesting the stock underperforms the index modestly during market declines.
A capture ratio of 1.39 demonstrates that upside gains outweigh downside losses, a favorable asymmetry for risk‑aware investors.

Positive Characteristics
High upside capture (149.4%) points to robust participation in market rallies.
Resilient performance in Bear-LowVol (4.25% avg) provides a defensive buffer during orderly downturns.
Current Bull-HighVol regime aligns with the stock’s strongest historical return profile.

Investment Highlights & Risk Summary

Valero Energy Corporation (VLO) — Summary & Implications

Valero Energy Corporation delivered an exceptional 1‑year total return of 104.66%, generating an alpha of 79.55% versus the S&P 500 and 62.14% versus its sector ETF (XLE). The stock’s upside capture of 149.4% demonstrates strong participation in market rallies, while its beta of 1.093 signals a slightly higher sensitivity to overall market moves. However, the upside is tempered by a downside capture of 107.4% and a historic maximum drawdown of -71.88%, indicating that the stock has also amplified losses during market declines. Risk‑adjusted performance is modest, with a Sharpe ratio of 0.544 and a Sortino ratio of 0.76, reflecting that the high absolute returns come at the cost of elevated volatility (annualized 39.63%). Investors should weigh the impressive short‑term outperformance against the pronounced drawdown risk and the relatively low risk‑adjusted metrics when considering exposure to Valero over the next 6‑18 months.

Summary Dashboard

Investment Highlights

1‑year total return of 104.66% represents a more than double increase in share price, underscoring powerful momentum in the energy market.
Alpha of 79.55% versus the S&P 500 and 62.14% versus the XLE sector index highlights Valero's ability to outperform both the broad market and its direct peers.
Upside capture of 149.4% indicates that Valero participates fully in market rallies, delivering 49.4% more upside than the sector benchmark.
Capture ratio (upside/downside) of 1.39 shows that the stock delivers higher upside than downside relative to the sector, despite a downside capture above 100%.
Beta of 1.093 suggests the stock moves slightly more than the market, offering investors a levered exposure to energy price dynamics.

Risk-Return Rankings

VLO ELEVATED

Valero offers high absolute returns with strong outperformance but carries elevated volatility and deep drawdown risk.

Strength: Exceptional 1‑year return and high alpha versus both the S&P 500 and XLE.

Concern: Maximum historical drawdown of -71.88% and modest Sharpe (0.544) indicate significant downside risk.

Key Takeaways

Valero’s return profile far exceeds the market and sector, driven by energy price tailwinds.
Risk‑adjusted metrics are modest, meaning the excess return comes with high volatility.
The stock’s downside capture above 100% signals that it can underperform during market corrections.
A deep drawdown flag (-71.9%) highlights the potential for large capital losses in adverse regimes.
Beta above 1 makes Valero a more aggressive component within an energy‑heavy portfolio.

PORTFOLIO IMPLICATIONS

For investors seeking high upside exposure to the energy sector, Valero can serve as a growth‑oriented satellite position, especially in a portfolio that already contains lower‑beta, defensive assets to offset its volatility. However, given the elevated drawdown risk and modest risk‑adjusted returns, prudent allocation should be limited to a modest percentage of total equity exposure, and complemented with assets that exhibit low correlation and lower beta to dampen overall portfolio volatility.

VLO

Related Reports

Visit finexus.net/reports for more reports

Report written 2026-04-15 • Finexus