Correlation Between NGL Energy and Genesis Energy

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

Diversification Opportunities for NGL Energy and Genesis Energy

-0.21

Correlation Coefficient

NGL Energy  Genesis Energy

Very good diversification

The 3 months correlation between NGL and Genesis is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP 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 Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of NGL Energy i.e., NGL Energy and Genesis Energy go up and down completely randomly.

Pair Corralation between NGL Energy and Genesis Energy

Assuming the 90 days trading horizon NGL Energy Partners is expected to generate 0.34 times more return on investment than Genesis Energy. However, NGL Energy Partners is 2.96 times less risky than Genesis Energy. It trades about 0.11 of its potential returns per unit of risk. Genesis Energy LP is currently generating about -0.07 per unit of risk. If you would invest  2,262  in NGL Energy Partners on September 3, 2024 and sell it today you would earn a total of  110.00  from holding NGL Energy Partners or generate 4.86% return on investment over 90 days.

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

NGL Energy Partners  vs.  Genesis Energy LP

NGL Energy Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 8 (%) 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.

Genesis Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genesis Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with NGL Energy and Genesis Energy

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

The idea behind NGL Energy Partners and Genesis Energy 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.