Correlation Between Global Partners and Plains All

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

Diversification Opportunities for Global Partners and Plains All

0.44

Correlation Coefficient

Global Partners  Plains All

Very weak diversification

The 3 months correlation between Global and Plains is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Global Partners LP and Plains All American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains All American 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 Plains All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains All American has no effect on the direction of Global Partners i.e., Global Partners and Plains All go up and down completely randomly.

Pair Corralation between Global Partners and Plains All

Considering the 90-day investment horizon Global Partners LP is expected to generate 1.48 times more return on investment than Plains All. However, Global Partners is 1.48 times more volatile than Plains All American. It trades about 0.26 of its potential returns per unit of risk. Plains All American is currently generating about 0.1 per unit of risk. If you would invest  4,132  in Global Partners LP on September 3, 2024 and sell it today you would earn a total of  1,513  from holding Global Partners LP or generate 36.62% return on investment over 90 days.

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

Global Partners LP  vs.  Plains All American

Global Partners LP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Global Partners LP are ranked lower than 20 (%) 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.

Plains All American

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Plains All may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Global Partners and Plains All

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

The idea behind Global Partners LP and Plains All American 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.