Correlation Between Energy Transfer and Bannerman Resources

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

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

Diversification Opportunities for Energy Transfer and Bannerman Resources

-0.4

Correlation Coefficient

Energy Transfer  Bannerman Resources

Very good diversification

The 3 months correlation between Energy and Bannerman is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Bannerman Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bannerman Resources and Energy Transfer 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 Energy Transfer LP are associated (or correlated) with Bannerman Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bannerman Resources has no effect on the direction of Energy Transfer i.e., Energy Transfer and Bannerman Resources go up and down completely randomly.

Pair Corralation between Energy Transfer and Bannerman Resources

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 1.0 times less return on investment than Bannerman Resources. But when comparing it to its historical volatility, Energy Transfer LP is 3.45 times less risky than Bannerman Resources. It trades about 0.26 of its potential returns per unit of risk. Bannerman Resources is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  150.00  in Bannerman Resources on September 14, 2024 and sell it today you would earn a total of  22.00  from holding Bannerman Resources or generate 14.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Energy Transfer LP  vs.  Bannerman Resources

Energy Transfer LP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Bannerman Resources

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bannerman Resources are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile essential indicators, Bannerman Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Transfer and Bannerman Resources

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

The idea behind Energy Transfer LP and Bannerman Resources 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.