Correlation Between Plains All and DCP Midstream
Can any of the company-specific risk be diversified away by investing in both Plains All and DCP 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 Plains All and DCP Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plains All American and DCP Midstream LP, you can compare the effects of market volatilities on Plains All and DCP 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 Plains All with a short position of DCP Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains All and DCP Midstream.
Diversification Opportunities for Plains All and DCP Midstream
-0.11 | Correlation Coefficient |
Good diversification
The 3 months correlation between Plains and DCP is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and DCP Midstream LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCP Midstream LP and Plains All 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 Plains All American are associated (or correlated) with DCP Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCP Midstream LP has no effect on the direction of Plains All i.e., Plains All and DCP Midstream go up and down completely randomly.
Pair Corralation between Plains All and DCP Midstream
Considering the 90-day investment horizon Plains All American is expected to generate 1.94 times more return on investment than DCP Midstream. However, Plains All is 1.94 times more volatile than DCP Midstream LP. It trades about 0.09 of its potential returns per unit of risk. DCP Midstream LP is currently generating about 0.11 per unit of risk. If you would invest 1,026 in Plains All American on August 27, 2024 and sell it today you would earn a total of 768.00 from holding Plains All American or generate 74.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 27.02% |
| Values | Daily Returns |
Plains All American vs. DCP Midstream LP
Performance |
| Timeline |
| Plains All American |
| DCP Midstream LP |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Plains All and DCP Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plains All and DCP Midstream
The main advantage of trading using opposite Plains All and DCP Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains All position performs unexpectedly, DCP 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 DCP Midstream will offset losses from the drop in DCP Midstream's long position.| Plains All vs. Genesis Energy LP | Plains All vs. Western Midstream Partners | Plains All vs. Hess Midstream Partners | Plains All vs. Enterprise Products Partners |
| DCP Midstream vs. EnLink Midstream LLC | DCP Midstream vs. Western Midstream Partners | DCP Midstream vs. Targa Resources | DCP Midstream 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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