Correlation Between Enterprise Products and Magellan Midstream

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

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

Diversification Opportunities for Enterprise Products and Magellan Midstream

0.63

Correlation Coefficient

Enterprise Products  Magellan Midstream

Poor diversification

The 3 months correlation between Enterprise and Magellan is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and Magellan Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magellan Midstream and Enterprise Products 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 Enterprise Products Partners are associated (or correlated) with Magellan Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magellan Midstream has no effect on the direction of Enterprise Products i.e., Enterprise Products and Magellan Midstream go up and down completely randomly.

Pair Corralation between Enterprise Products and Magellan Midstream

If you would invest  2,863  in Enterprise Products Partners on August 31, 2024 and sell it today you would earn a total of  502.00  from holding Enterprise Products Partners or generate 17.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

Enterprise Products Partners  vs.  Magellan Midstream Partners

Enterprise Products

Risk-Adjusted Performance

26 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Magellan Midstream

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Magellan Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable primary indicators, Magellan Midstream is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Enterprise Products and Magellan Midstream

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

The idea behind Enterprise Products Partners and Magellan 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 Stocks Directory module to find actively traded stocks across global markets.