Correlation Between NGL Energy and Enterprise Products
Can any of the company-specific risk be diversified away by investing in both NGL Energy and Enterprise Products 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 NGL Energy and Enterprise Products into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGL Energy Partners and Enterprise Products Partners, you can compare the effects of market volatilities on NGL Energy and Enterprise Products 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 NGL Energy with a short position of Enterprise Products. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Enterprise Products.
Diversification Opportunities for NGL Energy and Enterprise Products
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between NGL and Enterprise is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Enterprise Products Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Products and NGL 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 NGL Energy Partners are associated (or correlated) with Enterprise Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Products has no effect on the direction of NGL Energy i.e., NGL Energy and Enterprise Products go up and down completely randomly.
Pair Corralation between NGL Energy and Enterprise Products
Assuming the 90 days trading horizon NGL Energy is expected to generate 4.98 times less return on investment than Enterprise Products. But when comparing it to its historical volatility, NGL Energy Partners is 1.53 times less risky than Enterprise Products. It trades about 0.16 of its potential returns per unit of risk. Enterprise Products Partners is currently generating about 0.51 of returns per unit of risk over similar time horizon. If you would invest 2,913 in Enterprise Products Partners on September 5, 2024 and sell it today you would earn a total of 417.00 from holding Enterprise Products Partners or generate 14.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NGL Energy Partners vs. Enterprise Products Partners
Performance |
| Timeline |
| NGL Energy Partners |
| Enterprise Products |
NGL Energy and Enterprise Products Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and Enterprise Products
The main advantage of trading using opposite NGL Energy and Enterprise Products positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy position performs unexpectedly, Enterprise Products 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 Enterprise Products will offset losses from the drop in Enterprise Products' long position.| NGL Energy vs. GasLog Partners LP | NGL Energy vs. Global Partners LP | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. GasLog Partners LP |
| Enterprise Products vs. MPLX LP | Enterprise Products vs. Kinder Morgan | Enterprise Products vs. ONEOK Inc | Enterprise Products vs. Energy Transfer 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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