Correlation Between Enterprise Products and NGL Energy
Can any of the company-specific risk be diversified away by investing in both Enterprise Products 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 Enterprise Products and NGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Enterprise Products Partners and NGL Energy Partners, you can compare the effects of market volatilities on Enterprise Products 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 Enterprise Products with a short position of NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Enterprise Products and NGL Energy.
Diversification Opportunities for Enterprise Products and NGL Energy
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Enterprise and NGL is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners 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 Enterprise Products 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 Enterprise Products Partners 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 Enterprise Products i.e., Enterprise Products and NGL Energy go up and down completely randomly.
Pair Corralation between Enterprise Products and NGL Energy
Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 1.38 times more return on investment than NGL Energy. However, Enterprise Products is 1.38 times more volatile than NGL Energy Partners. It trades about 0.21 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.19 per unit of risk. If you would invest 2,887 in Enterprise Products Partners on September 12, 2024 and sell it today you would earn a total of 367.00 from holding Enterprise Products Partners or generate 12.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Enterprise Products Partners vs. NGL Energy Partners
Performance |
| Timeline |
| Enterprise Products |
| NGL Energy Partners |
Enterprise Products and NGL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Enterprise Products and NGL Energy
The main advantage of trading using opposite Enterprise Products and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Enterprise Products 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.| Enterprise Products vs. MPLX LP | Enterprise Products vs. Kinder Morgan | Enterprise Products vs. ONEOK Inc | Enterprise Products vs. Energy Transfer LP |
| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. GasLog Partners LP | NGL Energy vs. GasLog Partners LP |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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