Correlation Between NGL Energy and Williams Companies
Can any of the company-specific risk be diversified away by investing in both NGL Energy and Williams Companies 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 Williams Companies 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 Williams Companies, you can compare the effects of market volatilities on NGL Energy and Williams Companies 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 Williams Companies. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Williams Companies.
Diversification Opportunities for NGL Energy and Williams Companies
-0.09 | Correlation Coefficient |
Good diversification
The 3 months correlation between NGL and Williams is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Williams Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Companies 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 Williams Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Companies has no effect on the direction of NGL Energy i.e., NGL Energy and Williams Companies go up and down completely randomly.
Pair Corralation between NGL Energy and Williams Companies
Considering the 90-day investment horizon NGL Energy Partners is expected to under-perform the Williams Companies. In addition to that, NGL Energy is 1.87 times more volatile than Williams Companies. It trades about -0.39 of its total potential returns per unit of risk. Williams Companies is currently generating about -0.02 per unit of volatility. If you would invest 5,354 in Williams Companies on January 9, 2025 and sell it today you would lose (102.00) from holding Williams Companies or give up 1.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
NGL Energy Partners vs. Williams Companies
Performance |
| Timeline |
| NGL Energy Partners |
| Williams Companies |
NGL Energy and Williams Companies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NGL Energy and Williams Companies
The main advantage of trading using opposite NGL Energy and Williams Companies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy position performs unexpectedly, Williams Companies 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 Williams Companies will offset losses from the drop in Williams Companies' 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 |
| Williams Companies vs. Enterprise Products Partners | Williams Companies vs. ONEOK Inc | Williams Companies vs. Energy Transfer LP | Williams Companies vs. Enbridge |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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