Correlation Between NGL Energy and Genesis Energy
Can any of the company-specific risk be diversified away by investing in both NGL Energy and Genesis 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 NGL Energy and Genesis Energy 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 Genesis Energy LP, you can compare the effects of market volatilities on NGL Energy and Genesis 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 NGL Energy with a short position of Genesis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Genesis Energy.
Diversification Opportunities for NGL Energy and Genesis Energy
-0.24 | Correlation Coefficient |
Very good diversification
The 3 months correlation between NGL and Genesis is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP 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 Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of NGL Energy i.e., NGL Energy and Genesis Energy go up and down completely randomly.
Pair Corralation between NGL Energy and Genesis Energy
Assuming the 90 days trading horizon NGL Energy is expected to generate 2.32 times less return on investment than Genesis Energy. But when comparing it to its historical volatility, NGL Energy Partners is 2.87 times less risky than Genesis Energy. It trades about 0.34 of its potential returns per unit of risk. Genesis Energy LP is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest 992.00 in Genesis Energy LP on October 20, 2024 and sell it today you would earn a total of 90.00 from holding Genesis Energy LP or generate 9.07% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NGL Energy Partners vs. Genesis Energy LP
Performance |
| Timeline |
| NGL Energy Partners |
| Genesis Energy LP |
NGL Energy and Genesis Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and Genesis Energy
The main advantage of trading using opposite NGL Energy and Genesis Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy position performs unexpectedly, Genesis 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 Genesis Energy will offset losses from the drop in Genesis Energy's long position.| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. GasLog Partners LP | NGL Energy vs. GasLog Partners LP |
| Genesis Energy vs. Brooge Holdings | Genesis Energy vs. Plains All American | Genesis Energy vs. Western Midstream Partners | Genesis Energy vs. Hess Midstream 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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