Correlation Between Targa Resources and Plains All
Can any of the company-specific risk be diversified away by investing in both Targa Resources and Plains All 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 Targa Resources and Plains All into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Targa Resources and Plains All American, you can compare the effects of market volatilities on Targa Resources and Plains All 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 Targa Resources with a short position of Plains All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Targa Resources and Plains All.
Diversification Opportunities for Targa Resources and Plains All
-0.02 | Correlation Coefficient |
Good diversification
The 3 months correlation between Targa and Plains is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Targa Resources and Plains All American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains All American and Targa Resources 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 Targa Resources are associated (or correlated) with Plains All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains All American has no effect on the direction of Targa Resources i.e., Targa Resources and Plains All go up and down completely randomly.
Pair Corralation between Targa Resources and Plains All
Given the investment horizon of 90 days Targa Resources is expected to generate 1.26 times more return on investment than Plains All. However, Targa Resources is 1.26 times more volatile than Plains All American. It trades about 0.6 of its potential returns per unit of risk. Plains All American is currently generating about 0.21 per unit of risk. If you would invest 16,509 in Targa Resources on August 24, 2024 and sell it today you would earn a total of 4,260 from holding Targa Resources or generate 25.8% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Targa Resources vs. Plains All American
Performance |
| Timeline |
| Targa Resources |
| Plains All American |
Targa Resources and Plains All Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Targa Resources and Plains All
The main advantage of trading using opposite Targa Resources and Plains All positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Targa Resources position performs unexpectedly, Plains All 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 Plains All will offset losses from the drop in Plains All's long position.| Targa Resources vs. Plains GP Holdings | Targa Resources vs. Western Midstream Partners | Targa Resources vs. EnLink Midstream LLC | Targa Resources vs. Plains All American |
| Plains All vs. ONEOK Inc | Plains All vs. Enterprise Products Partners | Plains All vs. Energy Transfer LP | Plains All vs. Kinder Morgan |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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