Correlation Between Dynagas LNG and Plains GP

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

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

Diversification Opportunities for Dynagas LNG and Plains GP

0.61

Correlation Coefficient

Dynagas LNG  Plains GP

Poor diversification

The 3 months correlation between Dynagas and Plains is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Plains GP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains GP Holdings and Dynagas LNG 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 Dynagas LNG Partners are associated (or correlated) with Plains GP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains GP Holdings has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and Plains GP go up and down completely randomly.

Pair Corralation between Dynagas LNG and Plains GP

Given the investment horizon of 90 days Dynagas LNG Partners is expected to generate 1.83 times more return on investment than Plains GP. However, Dynagas LNG is 1.83 times more volatile than Plains GP Holdings. It trades about 0.17 of its potential returns per unit of risk. Plains GP Holdings is currently generating about 0.09 per unit of risk. If you would invest  368.00  in Dynagas LNG Partners on September 5, 2024 and sell it today you would earn a total of  99.00  from holding Dynagas LNG Partners or generate 26.9% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Plains GP Holdings

Dynagas LNG Partners

Risk-Adjusted Performance

13 of 100

Good

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

Plains GP Holdings

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plains GP Holdings are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Plains GP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Dynagas LNG and Plains GP

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

The idea behind Dynagas LNG Partners and Plains GP Holdings 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.