Correlation Between Dynagas LNG and Martin Midstream

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

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

Diversification Opportunities for Dynagas LNG and Martin Midstream

0.69

Correlation Coefficient

Dynagas LNG  Martin Midstream

Poor diversification

The 3 months correlation between Dynagas and Martin is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Martin Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Martin Midstream Partners and Dynagas LNG 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 Dynagas LNG Partners are associated (or correlated) with Martin Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Martin Midstream Partners has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and Martin Midstream go up and down completely randomly.

Pair Corralation between Dynagas LNG and Martin Midstream

Assuming the 90 days trading horizon Dynagas LNG is expected to generate 3.97 times less return on investment than Martin Midstream. But when comparing it to its historical volatility, Dynagas LNG Partners is 3.59 times less risky than Martin Midstream. It trades about 0.11 of its potential returns per unit of risk. Martin Midstream Partners is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  356.00  in Martin Midstream Partners on September 3, 2024 and sell it today you would earn a total of  42.00  from holding Martin Midstream Partners or generate 11.8% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Martin Midstream Partners

Dynagas LNG Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dynagas LNG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Martin Midstream Partners

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with Dynagas LNG and Martin Midstream

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

The idea behind Dynagas LNG Partners and Martin Midstream 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.