Correlation Between Hess Midstream and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Hess 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 Hess 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 Hess Midstream Partners and BP Prudhoe Bay, you can compare the effects of market volatilities on Hess 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 Hess Midstream with a short position of BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess Midstream and BP Prudhoe.
Diversification Opportunities for Hess Midstream and BP Prudhoe
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hess and BPT is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners 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 Hess 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 Hess Midstream Partners 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 Hess Midstream i.e., Hess Midstream and BP Prudhoe go up and down completely randomly.
Pair Corralation between Hess Midstream and BP Prudhoe
Given the investment horizon of 90 days Hess Midstream Partners is expected to generate 0.28 times more return on investment than BP Prudhoe. However, Hess Midstream Partners is 3.58 times less risky than BP Prudhoe. It trades about 0.07 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 2,517 in Hess Midstream Partners on August 27, 2024 and sell it today you would earn a total of 1,161 from holding Hess Midstream Partners or generate 46.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hess Midstream Partners vs. BP Prudhoe Bay
Performance |
| Timeline |
| Hess Midstream Partners |
| BP Prudhoe Bay |
Hess Midstream and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hess Midstream and BP Prudhoe
The main advantage of trading using opposite Hess Midstream and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess 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.| Hess Midstream vs. MPLX LP | Hess Midstream vs. Western Midstream Partners | Hess Midstream vs. Plains All American | Hess Midstream vs. Antero Midstream Partners |
| 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.
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