Correlation Between Western Midstream and Golar LNG
Can any of the company-specific risk be diversified away by investing in both Western Midstream and Golar LNG 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 Western Midstream and Golar LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Midstream Partners and Golar LNG Limited, you can compare the effects of market volatilities on Western Midstream and Golar LNG 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 Western Midstream with a short position of Golar LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Golar LNG.
Diversification Opportunities for Western Midstream and Golar LNG
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Western and Golar is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Golar LNG Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Golar LNG Limited and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Golar LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Golar LNG Limited has no effect on the direction of Western Midstream i.e., Western Midstream and Golar LNG go up and down completely randomly.
Pair Corralation between Western Midstream and Golar LNG
Considering the 90-day investment horizon Western Midstream Partners is expected to generate 0.74 times more return on investment than Golar LNG. However, Western Midstream Partners is 1.36 times less risky than Golar LNG. It trades about 0.14 of its potential returns per unit of risk. Golar LNG Limited is currently generating about 0.0 per unit of risk. If you would invest 3,710 in Western Midstream Partners on August 27, 2024 and sell it today you would earn a total of 177.00 from holding Western Midstream Partners or generate 4.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Midstream Partners vs. Golar LNG Limited
Performance |
| Timeline |
| Western Midstream |
| Golar LNG Limited |
Western Midstream and Golar LNG Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and Golar LNG
The main advantage of trading using opposite Western Midstream and Golar LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream position performs unexpectedly, Golar LNG 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 Golar LNG will offset losses from the drop in Golar LNG's long position.| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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