Correlation Between Hess Midstream and Global Partners

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

Diversification Opportunities for Hess Midstream and Global Partners

0.44

Correlation Coefficient

Hess Midstream  Global Partners

Very weak diversification

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

Pair Corralation between Hess Midstream and Global Partners

Given the investment horizon of 90 days Hess Midstream is expected to generate 5.48 times less return on investment than Global Partners. But when comparing it to its historical volatility, Hess Midstream Partners is 1.74 times less risky than Global Partners. It trades about 0.08 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.26 of returns per unit of risk over similar time horizon. 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

Hess Midstream Partners  vs.  Global Partners LP

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 healthy basic indicators, Hess Midstream is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

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.

Pair Trading with Hess Midstream and Global Partners

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

The idea behind Hess Midstream Partners and Global Partners LP 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.