Correlation Between Dynagas LNG and DT Midstream

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

Diversification Opportunities for Dynagas LNG and DT Midstream

0.84
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Dynagas and DTM is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream 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 DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and DT Midstream go up and down completely randomly.

Pair Corralation between Dynagas LNG and DT Midstream

Given the investment horizon of 90 days Dynagas LNG Partners is expected to under-perform the DT Midstream. In addition to that, Dynagas LNG is 1.09 times more volatile than DT Midstream. It trades about -0.1 of its total potential returns per unit of risk. DT Midstream is currently generating about -0.07 per unit of volatility. If you would invest  10,496  in DT Midstream on September 24, 2024 and sell it today you would lose (356.00) from holding DT Midstream or give up 3.39% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Dynagas LNG Partners  vs.  DT Midstream

 Performance 
       Timeline  
Dynagas LNG Partners 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.
DT Midstream 

Risk-Adjusted Performance

18 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, DT Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Dynagas LNG and DT Midstream Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dynagas LNG and DT Midstream

The main advantage of trading using opposite Dynagas LNG and DT Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dynagas LNG position performs unexpectedly, DT 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 DT Midstream will offset losses from the drop in DT Midstream's long position.
The idea behind Dynagas LNG Partners and DT Midstream 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.

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