Correlation Between Cheniere Energy and Plains All

Can any of the company-specific risk be diversified away by investing in both Cheniere Energy and Plains All 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 Plains All 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 Plains All American, you can compare the effects of market volatilities on Cheniere Energy and Plains All 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 Plains All. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Plains All.

Diversification Opportunities for Cheniere Energy and Plains All

0.29

Correlation Coefficient

Cheniere Energy  Plains All

Modest diversification

The 3 months correlation between Cheniere and Plains is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy Partners and Plains All American in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains All American 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 Plains All. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains All American has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and Plains All go up and down completely randomly.

Pair Corralation between Cheniere Energy and Plains All

Considering the 90-day investment horizon Cheniere Energy Partners is expected to generate 1.03 times more return on investment than Plains All. However, Cheniere Energy is 1.03 times more volatile than Plains All American. It trades about 0.2 of its potential returns per unit of risk. Plains All American is currently generating about 0.04 per unit of risk. If you would invest  4,819  in Cheniere Energy Partners on August 30, 2024 and sell it today you would earn a total of  848.00  from holding Cheniere Energy Partners or generate 17.6% return on investment over 90 days.

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

Cheniere Energy Partners  vs.  Plains All American

Cheniere Energy Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Plains All American

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Plains All is not utilizing all of its potentials. The newest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Cheniere Energy and Plains All

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

The idea behind Cheniere Energy Partners and Plains All American 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.