Correlation Between Delek Logistics and NGL Energy

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

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

Diversification Opportunities for Delek Logistics and NGL Energy

0.54

Correlation Coefficient

Delek Logistics  NGL Energy

Very weak diversification

The 3 months correlation between Delek and NGL is 0.54. Overlapping area represents the amount of risk that can be diversified away by holding Delek Logistics Partners 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 Delek Logistics 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 Delek Logistics Partners 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 Delek Logistics i.e., Delek Logistics and NGL Energy go up and down completely randomly.

Pair Corralation between Delek Logistics and NGL Energy

Considering the 90-day investment horizon Delek Logistics Partners is expected to under-perform the NGL Energy. But the stock apears to be less risky and, when comparing its historical volatility, Delek Logistics Partners is 1.53 times less risky than NGL Energy. The stock trades about -0.04 of its potential returns per unit of risk. The NGL Energy Partners is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  447.00  in NGL Energy Partners on September 15, 2024 and sell it today you would earn a total of  18.00  from holding NGL Energy Partners or generate 4.03% return on investment over 90 days.

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

Delek Logistics Partners  vs.  NGL Energy Partners

Delek Logistics Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Delek Logistics Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, Delek Logistics is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

NGL Energy Partners

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent technical and fundamental indicators, NGL Energy is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Delek Logistics and NGL Energy

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

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.