Correlation Between ONEOK and Hess Midstream

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

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

Diversification Opportunities for ONEOK and Hess Midstream

0.39

Correlation Coefficient

ONEOK  Hess Midstream

Weak diversification

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

Pair Corralation between ONEOK and Hess Midstream

Considering the 90-day investment horizon ONEOK Inc is expected to generate 1.51 times more return on investment than Hess Midstream. However, ONEOK is 1.51 times more volatile than Hess Midstream Partners. It trades about 0.21 of its potential returns per unit of risk. Hess Midstream Partners is currently generating about 0.06 per unit of risk. If you would invest  9,130  in ONEOK Inc on August 31, 2024 and sell it today you would earn a total of  2,129  from holding ONEOK Inc or generate 23.32% return on investment over 90 days.

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

ONEOK Inc  vs.  Hess Midstream Partners

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.

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.

Pair Trading with ONEOK and Hess Midstream

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

The idea behind ONEOK Inc and Hess Midstream 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.