Correlation Between NuStar Energy and Targa Resources

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

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

Diversification Opportunities for NuStar Energy and Targa Resources

0.69

Correlation Coefficient

NuStar Energy  Targa Resources

Poor diversification

The 3 months correlation between NuStar and Targa is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding NuStar Energy LP and Targa Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Targa Resources and NuStar 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 NuStar Energy LP are associated (or correlated) with Targa Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Targa Resources has no effect on the direction of NuStar Energy i.e., NuStar Energy and Targa Resources go up and down completely randomly.

Pair Corralation between NuStar Energy and Targa Resources

If you would invest  14,649  in Targa Resources on September 4, 2024 and sell it today you would earn a total of  4,805  from holding Targa Resources or generate 32.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.59%
Values	Daily Returns

NuStar Energy LP  vs.  Targa Resources

NuStar Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuStar Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NuStar Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Targa Resources

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Targa Resources are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Targa Resources reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NuStar Energy and Targa Resources

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

The idea behind NuStar Energy LP and Targa Resources 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.