Correlation Between Dynagas LNG and SMLP Old

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

Diversification Opportunities for Dynagas LNG and SMLP Old

0.65

Correlation Coefficient

Dynagas LNG  SMLP Old

Poor diversification

The 3 months correlation between Dynagas and SMLP is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and SMLP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMLP Old 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 SMLP Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMLP Old has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and SMLP Old go up and down completely randomly.

Pair Corralation between Dynagas LNG and SMLP Old

If you would invest  457.00  in Dynagas LNG Partners on October 21, 2024 and sell it today you would earn a total of  53.00  from holding Dynagas LNG Partners or generate 11.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

Dynagas LNG Partners  vs.  SMLP Old

Dynagas LNG Partners

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

SMLP Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMLP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, SMLP Old is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Dynagas LNG and SMLP Old

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

The idea behind Dynagas LNG Partners and SMLP Old 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.