Correlation Between Clearway Energy and NGL Energy
Can any of the company-specific risk be diversified away by investing in both Clearway Energy and NGL 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 Clearway Energy and NGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Clearway Energy and NGL Energy Partners, you can compare the effects of market volatilities on Clearway Energy and NGL 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 Clearway Energy with a short position of NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Clearway Energy and NGL Energy.
Diversification Opportunities for Clearway Energy and NGL Energy
0.58 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Clearway and NGL is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Clearway Energy and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners and Clearway 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 Clearway Energy are associated (or correlated) with NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Clearway Energy i.e., Clearway Energy and NGL Energy go up and down completely randomly.
Pair Corralation between Clearway Energy and NGL Energy
Assuming the 90 days trading horizon Clearway Energy is expected to generate 2.4 times less return on investment than NGL Energy. But when comparing it to its historical volatility, Clearway Energy is 1.12 times less risky than NGL Energy. It trades about 0.16 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 404.00 in NGL Energy Partners on September 2, 2024 and sell it today you would earn a total of 78.00 from holding NGL Energy Partners or generate 19.31% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Clearway Energy vs. NGL Energy Partners
Performance |
| Timeline |
| Clearway Energy |
| NGL Energy Partners |
Clearway Energy and NGL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Clearway Energy and NGL Energy
The main advantage of trading using opposite Clearway Energy and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Clearway Energy position performs unexpectedly, NGL 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 NGL Energy will offset losses from the drop in NGL Energy's long position.| Clearway Energy vs. Atlantica Sustainable Infrastructure | Clearway Energy vs. Brookfield Renewable Corp | Clearway Energy vs. Nextera Energy Partners | Clearway Energy vs. Brookfield Renewable Partners |
| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. Kinetik Holdings |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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