Correlation Between NGL Energy and Western Midstream
Can any of the company-specific risk be diversified away by investing in both NGL 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 NGL 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 NGL Energy Partners and Western Midstream Partners, you can compare the effects of market volatilities on NGL 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 NGL Energy with a short position of Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Western Midstream.
Diversification Opportunities for NGL Energy and Western Midstream
0.59 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NGL and Western is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream 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 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 NGL Energy i.e., NGL Energy and Western Midstream go up and down completely randomly.
Pair Corralation between NGL Energy and Western Midstream
Considering the 90-day investment horizon NGL Energy Partners is expected to under-perform the Western Midstream. In addition to that, NGL Energy is 1.84 times more volatile than Western Midstream Partners. It trades about -0.05 of its total potential returns per unit of risk. Western Midstream Partners is currently generating about 0.06 per unit of volatility. If you would invest 3,482 in Western Midstream Partners on August 28, 2024 and sell it today you would earn a total of 350.00 from holding Western Midstream Partners or generate 10.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
NGL Energy Partners vs. Western Midstream Partners
Performance |
| Timeline |
| NGL Energy Partners |
| Western Midstream |
NGL Energy and Western Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and Western Midstream
The main advantage of trading using opposite NGL Energy and Western Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL 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.| NGL Energy vs. NGL Energy Partners | NGL Energy vs. Dynagas LNG Partners | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. Kinetik Holdings |
| 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 Top Crypto Exchanges module to search and analyze digital assets across top global cryptocurrency exchanges.
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