Correlation Between Permian Basin and Global Partners
Can any of the company-specific risk be diversified away by investing in both Permian Basin and Global Partners 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 Permian Basin and Global Partners into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Permian Basin Royalty and Global Partners LP, you can compare the effects of market volatilities on Permian Basin and Global Partners 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 Permian Basin with a short position of Global Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of Permian Basin and Global Partners.
Diversification Opportunities for Permian Basin and Global Partners
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Permian and Global is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Permian Basin Royalty and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP and Permian Basin 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 Permian Basin Royalty are associated (or correlated) with Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Permian Basin i.e., Permian Basin and Global Partners go up and down completely randomly.
Pair Corralation between Permian Basin and Global Partners
Considering the 90-day investment horizon Permian Basin Royalty is expected to under-perform the Global Partners. In addition to that, Permian Basin is 1.18 times more volatile than Global Partners LP. It trades about -0.01 of its total potential returns per unit of risk. Global Partners LP is currently generating about 0.05 per unit of volatility. If you would invest 4,244 in Global Partners LP on November 3, 2024 and sell it today you would earn a total of 1,174 from holding Global Partners LP or generate 27.66% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Permian Basin Royalty vs. Global Partners LP
Performance |
| Timeline |
| Permian Basin Royalty |
| Global Partners LP |
Permian Basin and Global Partners Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Permian Basin and Global Partners
The main advantage of trading using opposite Permian Basin and Global Partners positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Permian Basin position performs unexpectedly, Global Partners 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 Global Partners will offset losses from the drop in Global Partners' long position.| Permian Basin vs. Dorian LPG | Permian Basin vs. Frontline | Permian Basin vs. Torm PLC Class | Permian Basin vs. Plains All American |
| Global Partners vs. Plains All American | Global Partners vs. Genesis Energy LP | Global Partners vs. Western Midstream Partners | Global Partners 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 Stocks Directory module to find actively traded stocks across global markets.
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