Correlation Between Hess Midstream and DHT Holdings

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

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

Diversification Opportunities for Hess Midstream and DHT Holdings

-0.2

Correlation Coefficient

Hess Midstream  DHT Holdings

Good diversification

The 3 months correlation between Hess and DHT is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT Holdings and Hess Midstream 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 Hess Midstream Partners are associated (or correlated) with DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of Hess Midstream i.e., Hess Midstream and DHT Holdings go up and down completely randomly.

Pair Corralation between Hess Midstream and DHT Holdings

Given the investment horizon of 90 days Hess Midstream Partners is expected to generate 0.58 times more return on investment than DHT Holdings. However, Hess Midstream Partners is 1.73 times less risky than DHT Holdings. It trades about 0.34 of its potential returns per unit of risk. DHT Holdings is currently generating about -0.02 per unit of risk. If you would invest  3,388  in Hess Midstream Partners on September 5, 2024 and sell it today you would earn a total of  377.00  from holding Hess Midstream Partners or generate 11.13% return on investment over 90 days.

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

Hess Midstream Partners  vs.  DHT Holdings

Hess Midstream Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hess Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DHT Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DHT Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical indicators, DHT Holdings is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hess Midstream and DHT Holdings

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

The idea behind Hess Midstream Partners and DHT Holdings 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.