Correlation Between Dynagas LNG and Marine Petroleum

Can any of the company-specific risk be diversified away by investing in both Dynagas LNG and Marine Petroleum 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 Marine Petroleum 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 Marine Petroleum Trust, you can compare the effects of market volatilities on Dynagas LNG and Marine Petroleum 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 Marine Petroleum. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dynagas LNG and Marine Petroleum.

Diversification Opportunities for Dynagas LNG and Marine Petroleum

0.21

Correlation Coefficient

Dynagas LNG  Marine Petroleum

Modest diversification

The 3 months correlation between Dynagas and Marine is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Marine Petroleum Trust in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Marine Petroleum Trust 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 Marine Petroleum. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Marine Petroleum Trust has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and Marine Petroleum go up and down completely randomly.

Pair Corralation between Dynagas LNG and Marine Petroleum

Assuming the 90 days trading horizon Dynagas LNG Partners is expected to generate 0.37 times more return on investment than Marine Petroleum. However, Dynagas LNG Partners is 2.73 times less risky than Marine Petroleum. It trades about 0.03 of its potential returns per unit of risk. Marine Petroleum Trust is currently generating about -0.03 per unit of risk. If you would invest  2,515  in Dynagas LNG Partners on December 5, 2024 and sell it today you would earn a total of  8.00  from holding Dynagas LNG Partners or generate 0.32% return on investment over 90 days.

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

Dynagas LNG Partners  vs.  Marine Petroleum Trust

Dynagas LNG Partners

Risk-Adjusted Performance

Very Weak

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

Marine Petroleum Trust

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Marine Petroleum Trust are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Marine Petroleum may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dynagas LNG and Marine Petroleum

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

The idea behind Dynagas LNG Partners and Marine Petroleum Trust 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.