Correlation Between Root and MPLX LP
Can any of the company-specific risk be diversified away by investing in both Root and MPLX LP 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 Root and MPLX LP into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Root Inc and MPLX LP, you can compare the effects of market volatilities on Root and MPLX LP 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 Root with a short position of MPLX LP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Root and MPLX LP.
Diversification Opportunities for Root and MPLX LP
Poor diversification
The 3 months correlation between Root and MPLX is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Root Inc and MPLX LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPLX LP and Root 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 Root Inc are associated (or correlated) with MPLX LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPLX LP has no effect on the direction of Root i.e., Root and MPLX LP go up and down completely randomly.
Pair Corralation between Root and MPLX LP
Given the investment horizon of 90 days Root Inc is expected to generate 2.84 times more return on investment than MPLX LP. However, Root is 2.84 times more volatile than MPLX LP. It trades about 0.42 of its potential returns per unit of risk. MPLX LP is currently generating about 0.39 per unit of risk. If you would invest 7,742 in Root Inc on November 9, 2024 and sell it today you would earn a total of 3,229 from holding Root Inc or generate 41.71% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Root Inc vs. MPLX LP
Performance |
| Timeline |
| Root Inc |
| MPLX LP |
Root and MPLX LP Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Root and MPLX LP
The main advantage of trading using opposite Root and MPLX LP positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Root position performs unexpectedly, MPLX LP 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 MPLX LP will offset losses from the drop in MPLX LP's long position.| Root vs. Selective Insurance Group | Root vs. Donegal Group B | Root vs. Horace Mann Educators | Root vs. Global Indemnity PLC |
| MPLX LP vs. ONEOK Inc | MPLX LP vs. Enterprise Products Partners | MPLX LP vs. Energy Transfer LP | MPLX LP vs. Plains All American |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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