Correlation Between Avance Gas and Hess Midstream

Can any of the company-specific risk be diversified away by investing in both Avance Gas and Hess Midstream 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 Avance Gas and Hess Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Avance Gas Holding and Hess Midstream Partners, you can compare the effects of market volatilities on Avance Gas and Hess Midstream 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 Avance Gas with a short position of Hess Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Avance Gas and Hess Midstream.

Diversification Opportunities for Avance Gas and Hess Midstream

-0.1

Correlation Coefficient

Avance Gas  Hess Midstream

Good diversification

The 3 months correlation between Avance and Hess is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding Avance Gas Holding and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners and Avance Gas 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 Avance Gas Holding are associated (or correlated) with Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Avance Gas i.e., Avance Gas and Hess Midstream go up and down completely randomly.

Pair Corralation between Avance Gas and Hess Midstream

Assuming the 90 days horizon Avance Gas Holding is expected to under-perform the Hess Midstream. In addition to that, Avance Gas is 6.02 times more volatile than Hess Midstream Partners. It trades about -0.16 of its total potential returns per unit of risk. Hess Midstream Partners is currently generating about -0.03 per unit of volatility. If you would invest  3,662  in Hess Midstream Partners on September 24, 2024 and sell it today you would lose (42.00) from holding Hess Midstream Partners or give up 1.15% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.24%
Values	Daily Returns

Avance Gas Holding  vs.  Hess Midstream Partners

Avance Gas Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avance Gas Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Hess Midstream Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hess Midstream is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Avance Gas and Hess Midstream

The main advantage of trading using opposite Avance Gas and Hess Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Avance Gas position performs unexpectedly, Hess Midstream 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 Hess Midstream will offset losses from the drop in Hess Midstream's long position.

The idea behind Avance Gas Holding and Hess Midstream Partners pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.