Correlation Between Cheniere Energy and Western Midstream
Can any of the company-specific risk be diversified away by investing in both Cheniere Energy 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 Cheniere Energy and Western Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheniere Energy and Western Midstream Partners, you can compare the effects of market volatilities on Cheniere Energy 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 Cheniere Energy with a short position of Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Western Midstream.
Diversification Opportunities for Cheniere Energy and Western Midstream
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Cheniere and Western is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream and Cheniere Energy 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 Cheniere Energy 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 Cheniere Energy i.e., Cheniere Energy and Western Midstream go up and down completely randomly.
Pair Corralation between Cheniere Energy and Western Midstream
Considering the 90-day investment horizon Cheniere Energy is expected to generate 1.87 times less return on investment than Western Midstream. But when comparing it to its historical volatility, Cheniere Energy is 1.01 times less risky than Western Midstream. It trades about 0.04 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 2,158 in Western Midstream Partners on August 28, 2024 and sell it today you would earn a total of 1,674 from holding Western Midstream Partners or generate 77.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheniere Energy vs. Western Midstream Partners
Performance |
| Timeline |
| Cheniere Energy |
| Western Midstream |
Cheniere Energy and Western Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheniere Energy and Western Midstream
The main advantage of trading using opposite Cheniere Energy and Western Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy 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.| Cheniere Energy vs. Western Midstream Partners | Cheniere Energy vs. Williams Companies | Cheniere Energy vs. Enterprise Products Partners | Cheniere Energy vs. ONEOK Inc |
| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy 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 Stocks Directory module to find actively traded stocks across global markets.
Other Complementary Tools
| Competition Analyzer Analyze and compare many basic indicators for a group of related or unrelated entities | |
| Bonds Directory Find actively traded corporate debentures issued by US companies | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years |