Correlation Between Brooge Holdings and NGL Energy

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

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

Diversification Opportunities for Brooge Holdings and NGL Energy

-0.39

Correlation Coefficient

Brooge Holdings  NGL Energy

Very good diversification

The 3 months correlation between Brooge and NGL is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding Brooge Holdings 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 Brooge Holdings 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 Brooge Holdings 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 Brooge Holdings i.e., Brooge Holdings and NGL Energy go up and down completely randomly.

Pair Corralation between Brooge Holdings and NGL Energy

Given the investment horizon of 90 days Brooge Holdings is expected to generate 1.29 times less return on investment than NGL Energy. In addition to that, Brooge Holdings is 16.62 times more volatile than NGL Energy Partners. It trades about 0.01 of its total potential returns per unit of risk. NGL Energy Partners is currently generating about 0.16 per unit of volatility. If you would invest  2,316  in NGL Energy Partners on December 28, 2024 and sell it today you would earn a total of  89.00  from holding NGL Energy Partners or generate 3.84% return on investment over 90 days.

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

Brooge Holdings  vs.  NGL Energy Partners

Brooge Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brooge Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brooge Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

NGL Energy Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 12 (%) 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.

Pair Trading with Brooge Holdings and NGL Energy

The main advantage of trading using opposite Brooge Holdings and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Brooge Holdings 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.

The idea behind Brooge Holdings and NGL Energy 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.