Correlation Between Natural Gas and USA Compression
Can any of the company-specific risk be diversified away by investing in both Natural Gas and USA Compression 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 Natural Gas and USA Compression into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Natural Gas Services and USA Compression Partners, you can compare the effects of market volatilities on Natural Gas and USA Compression 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 Natural Gas with a short position of USA Compression. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and USA Compression.
Diversification Opportunities for Natural Gas and USA Compression
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Natural and USA is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners and Natural Gas 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 Natural Gas Services are associated (or correlated) with USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of Natural Gas i.e., Natural Gas and USA Compression go up and down completely randomly.
Pair Corralation between Natural Gas and USA Compression
Considering the 90-day investment horizon Natural Gas Services is expected to generate 1.71 times more return on investment than USA Compression. However, Natural Gas is 1.71 times more volatile than USA Compression Partners. It trades about 0.08 of its potential returns per unit of risk. USA Compression Partners is currently generating about 0.06 per unit of risk. If you would invest 1,120 in Natural Gas Services on August 26, 2024 and sell it today you would earn a total of 1,668 from holding Natural Gas Services or generate 148.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Natural Gas Services vs. USA Compression Partners
Performance |
| Timeline |
| Natural Gas Services |
| USA Compression Partners |
Natural Gas and USA Compression Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Natural Gas and USA Compression
The main advantage of trading using opposite Natural Gas and USA Compression positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Natural Gas position performs unexpectedly, USA Compression 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 USA Compression will offset losses from the drop in USA Compression's long position.| Natural Gas vs. Enerflex | Natural Gas vs. Forum Energy Technologies | Natural Gas vs. Archrock | Natural Gas vs. Geospace Technologies |
| USA Compression vs. ProPetro Holding Corp | USA Compression vs. RPC Inc | USA Compression vs. MRC Global | USA Compression vs. Expro Group Holdings |
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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