Correlation Between BP Prudhoe and NGL Energy
Can any of the company-specific risk be diversified away by investing in both BP Prudhoe and NGL 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 BP Prudhoe and NGL Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BP Prudhoe Bay and NGL Energy Partners, you can compare the effects of market volatilities on BP Prudhoe and NGL 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 BP Prudhoe with a short position of NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of BP Prudhoe and NGL Energy.
Diversification Opportunities for BP Prudhoe and NGL Energy
-0.62 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between BPT and NGL is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding BP Prudhoe Bay and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners and BP Prudhoe 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 BP Prudhoe Bay are associated (or correlated) with NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of BP Prudhoe i.e., BP Prudhoe and NGL Energy go up and down completely randomly.
Pair Corralation between BP Prudhoe and NGL Energy
Considering the 90-day investment horizon BP Prudhoe Bay is expected to under-perform the NGL Energy. In addition to that, BP Prudhoe is 11.71 times more volatile than NGL Energy Partners. It trades about -0.08 of its total potential returns per unit of risk. NGL Energy Partners is currently generating about 0.1 per unit of volatility. If you would invest 2,291 in NGL Energy Partners on December 1, 2024 and sell it today you would earn a total of 98.00 from holding NGL Energy Partners or generate 4.28% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
BP Prudhoe Bay vs. NGL Energy Partners
Performance |
Timeline |
BP Prudhoe Bay |
NGL Energy Partners |
BP Prudhoe and NGL Energy Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with BP Prudhoe and NGL Energy
The main advantage of trading using opposite BP Prudhoe and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BP Prudhoe position performs unexpectedly, NGL 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 NGL Energy will offset losses from the drop in NGL Energy's long position.BP Prudhoe vs. Viper Energy Ut | BP Prudhoe vs. FLEX LNG | BP Prudhoe vs. Hess Midstream Partners | BP Prudhoe vs. Frontline |
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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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.
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