Correlation Between Enbridge and Hess Midstream
Can any of the company-specific risk be diversified away by investing in both Enbridge and Hess Midstream 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 Enbridge and Hess Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enbridge and Hess Midstream Partners, you can compare the effects of market volatilities on Enbridge and Hess Midstream 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 Enbridge with a short position of Hess Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enbridge and Hess Midstream.
Diversification Opportunities for Enbridge and Hess Midstream
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between Enbridge and Hess is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Enbridge and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners and Enbridge 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 Enbridge are associated (or correlated) with Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Enbridge i.e., Enbridge and Hess Midstream go up and down completely randomly.
Pair Corralation between Enbridge and Hess Midstream
Considering the 90-day investment horizon Enbridge is expected to generate 1.01 times less return on investment than Hess Midstream. But when comparing it to its historical volatility, Enbridge is 1.35 times less risky than Hess Midstream. It trades about 0.37 of its potential returns per unit of risk. Hess Midstream Partners is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 3,422 in Hess Midstream Partners on August 27, 2024 and sell it today you would earn a total of 256.00 from holding Hess Midstream Partners or generate 7.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enbridge vs. Hess Midstream Partners
Performance |
| Timeline |
| Enbridge |
| Hess Midstream Partners |
Enbridge and Hess Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enbridge and Hess Midstream
The main advantage of trading using opposite Enbridge and Hess Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enbridge position performs unexpectedly, Hess Midstream 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 Hess Midstream will offset losses from the drop in Hess Midstream's long position.| Enbridge vs. Energy Transfer LP | Enbridge vs. Kinder Morgan | Enbridge vs. MPLX LP | Enbridge vs. Pembina Pipeline Corp |
| Hess Midstream vs. MPLX LP | Hess Midstream vs. Western Midstream Partners | Hess Midstream vs. Plains All American | Hess Midstream vs. Antero Midstream 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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