Correlation Between Global Partners and Hess Midstream

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

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

Diversification Opportunities for Global Partners and Hess Midstream

0.7

Correlation Coefficient

Global Partners  Hess Midstream

Poor diversification

The 3 months correlation between Global and Hess is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Global Partners LP and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners and Global Partners 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 Global Partners LP are associated (or correlated) with Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Global Partners i.e., Global Partners and Hess Midstream go up and down completely randomly.

Pair Corralation between Global Partners and Hess Midstream

Considering the 90-day investment horizon Global Partners LP is expected to generate 1.5 times more return on investment than Hess Midstream. However, Global Partners is 1.5 times more volatile than Hess Midstream Partners. It trades about 0.21 of its potential returns per unit of risk. Hess Midstream Partners is currently generating about 0.01 per unit of risk. If you would invest  4,238  in Global Partners LP on September 13, 2024 and sell it today you would earn a total of  1,127  from holding Global Partners LP or generate 26.59% return on investment over 90 days.

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

Global Partners LP  vs.  Hess Midstream Partners

Global Partners LP

Risk-Adjusted Performance

16 of 100

Solid

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

Hess Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hess Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Hess Midstream is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Global Partners and Hess Midstream

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

The idea behind Global Partners LP and Hess 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.