Correlation Between DCP Midstream and ONEOK
Can any of the company-specific risk be diversified away by investing in both DCP Midstream and ONEOK 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 DCP Midstream and ONEOK into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between DCP Midstream LP and ONEOK Inc, you can compare the effects of market volatilities on DCP Midstream and ONEOK 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 DCP Midstream with a short position of ONEOK. Check out your portfolio center. Please also check ongoing floating volatility patterns of DCP Midstream and ONEOK.
Diversification Opportunities for DCP Midstream and ONEOK
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between DCP and ONEOK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding DCP Midstream LP and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and DCP Midstream 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 DCP Midstream LP are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of DCP Midstream i.e., DCP Midstream and ONEOK go up and down completely randomly.
Pair Corralation between DCP Midstream and ONEOK
Considering the 90-day investment horizon DCP Midstream is expected to generate 5.96 times less return on investment than ONEOK. But when comparing it to its historical volatility, DCP Midstream LP is 18.95 times less risky than ONEOK. It trades about 0.49 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 5,617 in ONEOK Inc on August 31, 2024 and sell it today you would earn a total of 5,743 from holding ONEOK Inc or generate 102.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 2.14% |
| Values | Daily Returns |
DCP Midstream LP vs. ONEOK Inc
Performance |
| Timeline |
| DCP Midstream LP |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ONEOK Inc |
DCP Midstream and ONEOK Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with DCP Midstream and ONEOK
The main advantage of trading using opposite DCP Midstream and ONEOK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DCP Midstream position performs unexpectedly, ONEOK 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 ONEOK will offset losses from the drop in ONEOK's long position.| DCP Midstream vs. EnLink Midstream LLC | DCP Midstream vs. Western Midstream Partners | DCP Midstream vs. Targa Resources | DCP Midstream vs. Hess Midstream Partners |
| ONEOK vs. Atlantica Sustainable Infrastructure | ONEOK vs. Clearway Energy | ONEOK vs. Brookfield Renewable Corp | ONEOK vs. Nextera Energy Partners |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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