Correlation Between NGL Energy and Green Plains

Can any of the company-specific risk be diversified away by investing in both NGL Energy and Green Plains 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 NGL Energy and Green Plains into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for NGL Energy and Green Plains

0.42

Correlation Coefficient

NGL Energy  Green Plains

Very weak diversification

The 3 months correlation between NGL and Green is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Green Plains Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Green Plains Partners and NGL Energy 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 NGL Energy Partners are associated (or correlated) with Green Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Green Plains Partners has no effect on the direction of NGL Energy i.e., NGL Energy and Green Plains go up and down completely randomly.

Pair Corralation between NGL Energy and Green Plains

If you would invest  2,266  in NGL Energy Partners on September 3, 2024 and sell it today you would earn a total of  74.00  from holding NGL Energy Partners or generate 3.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

NGL Energy Partners  vs.  Green Plains Partners

NGL Energy Partners

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NGL Energy is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Green Plains Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Green Plains Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Green Plains is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with NGL Energy and Green Plains

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

The idea behind NGL Energy Partners and Green Plains 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.

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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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.