Correlation Between Cheniere Energy and ONEOK

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

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

Diversification Opportunities for Cheniere Energy and ONEOK

0.96

Correlation Coefficient

Cheniere Energy  ONEOK

Almost no diversification

The 3 months correlation between Cheniere and ONEOK is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and Cheniere 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 Cheniere Energy are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and ONEOK go up and down completely randomly.

Pair Corralation between Cheniere Energy and ONEOK

Assuming the 90 days trading horizon Cheniere Energy is expected to generate 1.36 times less return on investment than ONEOK. In addition to that, Cheniere Energy is 1.24 times more volatile than ONEOK Inc. It trades about 0.05 of its total potential returns per unit of risk. ONEOK Inc is currently generating about 0.08 per unit of volatility. If you would invest  5,469  in ONEOK Inc on September 22, 2024 and sell it today you would earn a total of  3,893  from holding ONEOK Inc or generate 71.18% return on investment over 90 days.

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

Cheniere Energy  vs.  ONEOK Inc

Cheniere Energy

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

ONEOK Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ONEOK reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheniere Energy and ONEOK

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

The idea behind Cheniere Energy and ONEOK Inc 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.