Correlation Between Antero Midstream and Global Partners

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

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

Diversification Opportunities for Antero Midstream and Global Partners

0.85

Correlation Coefficient

Antero Midstream  Global Partners

Very poor diversification

The 3 months correlation between Antero and Global is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Global Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Global Partners LP and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Global Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Global Partners LP has no effect on the direction of Antero Midstream i.e., Antero Midstream and Global Partners go up and down completely randomly.

Pair Corralation between Antero Midstream and Global Partners

Allowing for the 90-day total investment horizon Antero Midstream is expected to generate 4.43 times less return on investment than Global Partners. But when comparing it to its historical volatility, Antero Midstream Partners is 1.36 times less risky than Global Partners. It trades about 0.08 of its potential returns per unit of risk. Global Partners LP is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  4,132  in Global Partners LP on September 3, 2024 and sell it today you would earn a total of  1,513  from holding Global Partners LP or generate 36.62% return on investment over 90 days.

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

Antero Midstream Partners  vs.  Global Partners LP

Antero Midstream Partners

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak primary indicators, Antero Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Global Partners LP

Risk-Adjusted Performance

20 of 100

Solid

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

Pair Trading with Antero Midstream and Global Partners

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

The idea behind Antero Midstream Partners and Global Partners 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.

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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.