Correlation Between Cheniere Energy and EnLink Midstream

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

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

Diversification Opportunities for Cheniere Energy and EnLink Midstream

0.33

Correlation Coefficient

Cheniere Energy  EnLink Midstream

Weak diversification

The 3 months correlation between Cheniere and EnLink is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and EnLink Midstream LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream LLC 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 Partners are associated (or correlated) with EnLink Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream LLC has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and EnLink Midstream go up and down completely randomly.

Pair Corralation between Cheniere Energy and EnLink Midstream

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 1.39 times more return on investment than EnLink Midstream. However, Cheniere Energy is 1.39 times more volatile than EnLink Midstream LLC. It trades about -0.04 of its potential returns per unit of risk. EnLink Midstream LLC is currently generating about -0.16 per unit of risk. If you would invest  5,745  in Cheniere Energy Partners on October 5, 2024 and sell it today you would lose (137.00) from holding Cheniere Energy Partners or give up 2.38% of portfolio value over 90 days.

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

Cheniere Energy Partners  vs.  EnLink Midstream LLC

Cheniere Energy Partners

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy may actually be approaching a critical reversion point that can send shares even higher in February 2025.

EnLink Midstream LLC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days EnLink Midstream LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, EnLink Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Cheniere Energy and EnLink Midstream

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

The idea behind Cheniere Energy Partners and EnLink Midstream LLC 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.