Correlation Between Global Partners and NGL Energy
Can any of the company-specific risk be diversified away by investing in both Global Partners 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 Global Partners and NGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Global Partners LP and NGL Energy Partners, you can compare the effects of market volatilities on Global Partners 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 Global Partners with a short position of NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Global Partners and NGL Energy.
Diversification Opportunities for Global Partners and NGL Energy
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Global and NGL is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Global Partners LP 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 Global 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 Global Partners LP 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 Global Partners i.e., Global Partners and NGL Energy go up and down completely randomly.
Pair Corralation between Global Partners and NGL Energy
Assuming the 90 days trading horizon Global Partners is expected to generate 6.0 times less return on investment than NGL Energy. But when comparing it to its historical volatility, Global Partners LP is 4.73 times less risky than NGL Energy. It trades about 0.11 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 704.00 in NGL Energy Partners on August 31, 2024 and sell it today you would earn a total of 1,674 from holding NGL Energy Partners or generate 237.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Global Partners LP vs. NGL Energy Partners
Performance |
| Timeline |
| Global Partners LP |
| NGL Energy Partners |
Global Partners and NGL Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Global Partners and NGL Energy
The main advantage of trading using opposite Global Partners and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Global Partners 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.| Global Partners vs. GasLog Partners LP | Global Partners vs. GasLog Partners LP | Global Partners vs. Aquagold International | Global Partners vs. Thrivent High Yield |
| NGL Energy vs. GasLog Partners LP | NGL Energy vs. Global Partners LP | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. NGL 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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