Correlation Between Plains GP and Cheniere Energy
Can any of the company-specific risk be diversified away by investing in both Plains GP and Cheniere 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 Plains GP and Cheniere Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plains GP Holdings and Cheniere Energy, you can compare the effects of market volatilities on Plains GP and Cheniere 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 Plains GP with a short position of Cheniere Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains GP and Cheniere Energy.
Diversification Opportunities for Plains GP and Cheniere Energy
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Plains and Cheniere is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Plains GP Holdings and Cheniere Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy and Plains GP 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 GP Holdings are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy has no effect on the direction of Plains GP i.e., Plains GP and Cheniere Energy go up and down completely randomly.
Pair Corralation between Plains GP and Cheniere Energy
Given the investment horizon of 90 days Plains GP is expected to generate 5.27 times less return on investment than Cheniere Energy. But when comparing it to its historical volatility, Plains GP Holdings is 1.16 times less risky than Cheniere Energy. It trades about 0.05 of its potential returns per unit of risk. Cheniere Energy is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 18,207 in Cheniere Energy on August 28, 2024 and sell it today you would earn a total of 3,983 from holding Cheniere Energy or generate 21.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plains GP Holdings vs. Cheniere Energy
Performance |
| Timeline |
| Plains GP Holdings |
| Cheniere Energy |
Plains GP and Cheniere Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plains GP and Cheniere Energy
The main advantage of trading using opposite Plains GP and Cheniere Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains GP position performs unexpectedly, Cheniere 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 Cheniere Energy will offset losses from the drop in Cheniere Energy's long position.| Plains GP vs. Targa Resources | Plains GP vs. Western Midstream Partners | Plains GP vs. MPLX LP | Plains GP vs. Plains All American |
| Cheniere Energy vs. Western Midstream Partners | Cheniere Energy vs. Williams Companies | Cheniere Energy vs. Enterprise Products Partners | Cheniere Energy vs. ONEOK Inc |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
Other Complementary Tools
| Stocks Directory Find actively traded stocks across global markets | |
| FinTech Suite Use AI to screen and filter profitable investment opportunities | |
| CEOs Directory Screen CEOs from public companies around the world | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments |