Correlation Between Hess Midstream and ONEOK

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

Diversification Opportunities for Hess Midstream and ONEOK

0.39

Correlation Coefficient

Hess Midstream  ONEOK

Weak diversification

The 3 months correlation between Hess and ONEOK is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc 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 ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Hess Midstream i.e., Hess Midstream and ONEOK go up and down completely randomly.

Pair Corralation between Hess Midstream and ONEOK

Given the investment horizon of 90 days Hess Midstream is expected to generate 1.64 times less return on investment than ONEOK. But when comparing it to its historical volatility, Hess Midstream Partners is 1.15 times less risky than ONEOK. It trades about 0.09 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  5,908  in ONEOK Inc on August 31, 2024 and sell it today you would earn a total of  5,351  from holding ONEOK Inc or generate 90.57% return on investment over 90 days.

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

Hess Midstream Partners  vs.  ONEOK Inc

Hess Midstream Partners

Risk-Adjusted Performance

4 of 100

Weak

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.

ONEOK Inc

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward-looking signals, ONEOK exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hess Midstream and ONEOK

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

The idea behind Hess Midstream Partners and ONEOK Inc 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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.