Correlation Between Dynagas LNG and USA Compression

Can any of the company-specific risk be diversified away by investing in both Dynagas LNG and USA Compression 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 USA Compression 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 USA Compression Partners, you can compare the effects of market volatilities on Dynagas LNG and USA Compression 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 USA Compression. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynagas LNG and USA Compression.

Diversification Opportunities for Dynagas LNG and USA Compression

0.58

Correlation Coefficient

Dynagas LNG  USA Compression

Very weak diversification

The 3 months correlation between Dynagas and USA is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and USA Compression Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USA Compression Partners 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 USA Compression. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USA Compression Partners has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and USA Compression go up and down completely randomly.

Pair Corralation between Dynagas LNG and USA Compression

Given the investment horizon of 90 days Dynagas LNG Partners is expected to generate 1.73 times more return on investment than USA Compression. However, Dynagas LNG is 1.73 times more volatile than USA Compression Partners. It trades about 0.21 of its potential returns per unit of risk. USA Compression Partners is currently generating about -0.15 per unit of risk. If you would invest  466.00  in Dynagas LNG Partners on September 29, 2024 and sell it today you would earn a total of  64.00  from holding Dynagas LNG Partners or generate 13.73% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  USA Compression Partners

Dynagas LNG Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

USA Compression Partners

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in USA Compression Partners are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, USA Compression is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Dynagas LNG and USA Compression

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

The idea behind Dynagas LNG Partners and USA Compression 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.