Correlation Between Dynagas LNG and BP Prudhoe

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

Diversification Opportunities for Dynagas LNG and BP Prudhoe

-0.05

Correlation Coefficient

Dynagas LNG  BP Prudhoe

Good diversification

The 3 months correlation between Dynagas and BPT is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay 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 BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and BP Prudhoe go up and down completely randomly.

Pair Corralation between Dynagas LNG and BP Prudhoe

Given the investment horizon of 90 days Dynagas LNG Partners is expected to under-perform the BP Prudhoe. But the stock apears to be less risky and, when comparing its historical volatility, Dynagas LNG Partners is 2.81 times less risky than BP Prudhoe. The stock trades about -0.07 of its potential returns per unit of risk. The BP Prudhoe Bay is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  64.00  in BP Prudhoe Bay on December 19, 2024 and sell it today you would lose (4.00) from holding BP Prudhoe Bay or give up 6.25% of portfolio value over 90 days.

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

Dynagas LNG Partners  vs.  BP Prudhoe Bay

Dynagas LNG Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynagas LNG Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

BP Prudhoe Bay

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BP Prudhoe Bay are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, BP Prudhoe may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Dynagas LNG and BP Prudhoe

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

The idea behind Dynagas LNG Partners and BP Prudhoe Bay 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.