Correlation Between CenterPoint Energy and Cheniere Energy

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

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

Diversification Opportunities for CenterPoint Energy and Cheniere Energy

0.88

Correlation Coefficient

CenterPoint Energy  Cheniere Energy

Very poor diversification

The 3 months correlation between CenterPoint and Cheniere is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding CenterPoint Energy and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and CenterPoint Energy 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 CenterPoint Energy are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of CenterPoint Energy i.e., CenterPoint Energy and Cheniere Energy go up and down completely randomly.

Pair Corralation between CenterPoint Energy and Cheniere Energy

Considering the 90-day investment horizon CenterPoint Energy is expected to generate 1.46 times less return on investment than Cheniere Energy. But when comparing it to its historical volatility, CenterPoint Energy is 1.12 times less risky than Cheniere Energy. It trades about 0.17 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  4,794  in Cheniere Energy Partners on September 16, 2024 and sell it today you would earn a total of  1,018  from holding Cheniere Energy Partners or generate 21.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CenterPoint Energy  vs.  Cheniere Energy Partners

CenterPoint Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CenterPoint Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, CenterPoint Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Cheniere Energy Partners

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CenterPoint Energy and Cheniere Energy

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

The idea behind CenterPoint Energy and Cheniere Energy 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.