Correlation Between GasLog Partners and Western Midstream
Can any of the company-specific risk be diversified away by investing in both GasLog Partners and Western 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 GasLog Partners and Western Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between GasLog Partners LP and Western Midstream Partners, you can compare the effects of market volatilities on GasLog Partners and Western 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 GasLog Partners with a short position of Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of GasLog Partners and Western Midstream.
Diversification Opportunities for GasLog Partners and Western Midstream
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between GasLog and Western is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding GasLog Partners LP and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream and GasLog Partners 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 GasLog Partners LP are associated (or correlated) with Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of GasLog Partners i.e., GasLog Partners and Western Midstream go up and down completely randomly.
Pair Corralation between GasLog Partners and Western Midstream
Assuming the 90 days trading horizon GasLog Partners is expected to generate 2.41 times less return on investment than Western Midstream. But when comparing it to its historical volatility, GasLog Partners LP is 1.85 times less risky than Western Midstream. It trades about 0.07 of its potential returns per unit of risk. Western Midstream Partners is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,242 in Western Midstream Partners on September 3, 2024 and sell it today you would earn a total of 1,829 from holding Western Midstream Partners or generate 81.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
GasLog Partners LP vs. Western Midstream Partners
Performance |
| Timeline |
| GasLog Partners LP |
| Western Midstream |
GasLog Partners and Western Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with GasLog Partners and Western Midstream
The main advantage of trading using opposite GasLog Partners and Western Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GasLog Partners position performs unexpectedly, Western 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 Western Midstream will offset losses from the drop in Western Midstream's long position.The idea behind GasLog Partners LP and Western Midstream Partners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. SPACE | Western Midstream vs. T Rowe Price |
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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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