Correlation Between Western Midstream and International Seaways
Can any of the company-specific risk be diversified away by investing in both Western Midstream and International Seaways 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 International Seaways 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 International Seaways, you can compare the effects of market volatilities on Western Midstream and International Seaways 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 International Seaways. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and International Seaways.
Diversification Opportunities for Western Midstream and International Seaways
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Western and International is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and International Seaways in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Seaways 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 International Seaways. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Seaways has no effect on the direction of Western Midstream i.e., Western Midstream and International Seaways go up and down completely randomly.
Pair Corralation between Western Midstream and International Seaways
Considering the 90-day investment horizon Western Midstream Partners is expected to generate 1.02 times more return on investment than International Seaways. However, Western Midstream is 1.02 times more volatile than International Seaways. It trades about 0.21 of its potential returns per unit of risk. International Seaways is currently generating about -0.21 per unit of risk. If you would invest 3,681 in Western Midstream Partners on September 4, 2024 and sell it today you would earn a total of 301.00 from holding Western Midstream Partners or generate 8.18% 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. International Seaways
Performance |
| Timeline |
| Western Midstream |
| International Seaways |
Western Midstream and International Seaways Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and International Seaways
The main advantage of trading using opposite Western Midstream and International Seaways positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream position performs unexpectedly, International Seaways 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 International Seaways will offset losses from the drop in International Seaways' long position.| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
| International Seaways vs. EnLink Midstream LLC | International Seaways vs. Western Midstream Partners | International Seaways vs. Plains GP Holdings | International Seaways 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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