Correlation Between EnLink Midstream and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both EnLink Midstream and BP Prudhoe 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 EnLink Midstream and BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between EnLink Midstream LLC and BP Prudhoe Bay, you can compare the effects of market volatilities on EnLink Midstream and BP Prudhoe 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 EnLink Midstream with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of EnLink Midstream and BP Prudhoe.
Diversification Opportunities for EnLink Midstream and BP Prudhoe
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between EnLink and BPT is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay and EnLink 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 EnLink Midstream LLC are associated (or correlated) with BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of EnLink Midstream i.e., EnLink Midstream and BP Prudhoe go up and down completely randomly.
Pair Corralation between EnLink Midstream and BP Prudhoe
Given the investment horizon of 90 days EnLink Midstream LLC is expected to generate 0.38 times more return on investment than BP Prudhoe. However, EnLink Midstream LLC is 2.63 times less risky than BP Prudhoe. It trades about 0.06 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.08 per unit of risk. If you would invest 1,054 in EnLink Midstream LLC on August 30, 2024 and sell it today you would earn a total of 531.00 from holding EnLink Midstream LLC or generate 50.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
EnLink Midstream LLC vs. BP Prudhoe Bay
Performance |
| Timeline |
| EnLink Midstream LLC |
| BP Prudhoe Bay |
EnLink Midstream and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with EnLink Midstream and BP Prudhoe
The main advantage of trading using opposite EnLink Midstream and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EnLink Midstream position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| EnLink Midstream vs. Plains All American | EnLink Midstream vs. Hess Midstream Partners | EnLink Midstream vs. Western Midstream Partners | EnLink Midstream vs. Plains GP Holdings |
| BP Prudhoe vs. Viper Energy Ut | BP Prudhoe vs. FLEX LNG | BP Prudhoe vs. Hess Midstream Partners | BP Prudhoe vs. Frontline |
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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