Correlation Between Hess Midstream and Martin Midstream

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

Diversification Opportunities for Hess Midstream and Martin Midstream

-0.13

Correlation Coefficient

Hess Midstream  Martin Midstream

Good diversification

The 3 months correlation between Hess and Martin is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and Martin Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Midstream Partners 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 Martin Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Midstream Partners has no effect on the direction of Hess Midstream i.e., Hess Midstream and Martin Midstream go up and down completely randomly.

Pair Corralation between Hess Midstream and Martin Midstream

Given the investment horizon of 90 days Hess Midstream Partners is expected to generate 2.92 times more return on investment than Martin Midstream. However, Hess Midstream is 2.92 times more volatile than Martin Midstream Partners. It trades about 0.35 of its potential returns per unit of risk. Martin Midstream Partners is currently generating about 0.03 per unit of risk. If you would invest  3,400  in Hess Midstream Partners on August 31, 2024 and sell it today you would earn a total of  331.00  from holding Hess Midstream Partners or generate 9.74% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Hess Midstream Partners  vs.  Martin Midstream Partners

Hess Midstream Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 4 (%) 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.

Martin Midstream Partners

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Martin Midstream Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak essential indicators, Martin Midstream may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Hess Midstream and Martin Midstream

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

The idea behind Hess Midstream Partners and Martin 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.

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 Stocks Directory module to find actively traded stocks across global markets.