Correlation Between NGL Energy and Avance Gas

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

Diversification Opportunities for NGL Energy and Avance Gas

-0.47

Correlation Coefficient

NGL Energy  Avance Gas

Very good diversification

The 3 months correlation between NGL and Avance is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Avance Gas Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avance Gas Holding 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 Avance Gas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avance Gas Holding has no effect on the direction of NGL Energy i.e., NGL Energy and Avance Gas go up and down completely randomly.

Pair Corralation between NGL Energy and Avance Gas

Assuming the 90 days trading horizon NGL Energy Partners is expected to generate 0.09 times more return on investment than Avance Gas. However, NGL Energy Partners is 11.27 times less risky than Avance Gas. It trades about 0.24 of its potential returns per unit of risk. Avance Gas Holding is currently generating about -0.16 per unit of risk. If you would invest  2,301  in NGL Energy Partners on September 24, 2024 and sell it today you would earn a total of  84.00  from holding NGL Energy Partners or generate 3.65% return on investment over 90 days.

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

NGL Energy Partners  vs.  Avance Gas Holding

NGL Energy Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, NGL Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Avance Gas Holding

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Avance Gas Holding has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NGL Energy and Avance Gas

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

The idea behind NGL Energy Partners and Avance Gas Holding 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.