Correlation Between Energy Transfer and Wise Plc

Can any of the company-specific risk be diversified away by investing in both Energy Transfer and Wise Plc 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 Wise Plc 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 Wise plc, you can compare the effects of market volatilities on Energy Transfer and Wise Plc 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 Wise Plc. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Transfer and Wise Plc.

Diversification Opportunities for Energy Transfer and Wise Plc

0.87

Correlation Coefficient

Energy Transfer  Wise Plc

Very poor diversification

The 3 months correlation between Energy and Wise is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Wise plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wise plc 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 Wise Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wise plc has no effect on the direction of Energy Transfer i.e., Energy Transfer and Wise Plc go up and down completely randomly.

Pair Corralation between Energy Transfer and Wise Plc

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 5.53 times less return on investment than Wise Plc. But when comparing it to its historical volatility, Energy Transfer LP is 1.36 times less risky than Wise Plc. It trades about 0.09 of its potential returns per unit of risk. Wise plc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest  1,076  in Wise plc on September 21, 2024 and sell it today you would earn a total of  217.00  from holding Wise plc or generate 20.17% return on investment over 90 days.

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

Energy Transfer LP  vs.  Wise plc

Energy Transfer LP

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 16 (%) 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.

Wise plc

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Wise plc are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly inconsistent fundamental indicators, Wise Plc reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Transfer and Wise Plc

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

The idea behind Energy Transfer LP and Wise plc 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.