Correlation Between DT Midstream and Excelerate Energy

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

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

Diversification Opportunities for DT Midstream and Excelerate Energy

0.9

Correlation Coefficient

DT Midstream  Excelerate Energy

Almost no diversification

The 3 months correlation between DTM and Excelerate is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding DT Midstream and Excelerate Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Excelerate Energy and DT Midstream 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 DT Midstream are associated (or correlated) with Excelerate Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Excelerate Energy has no effect on the direction of DT Midstream i.e., DT Midstream and Excelerate Energy go up and down completely randomly.

Pair Corralation between DT Midstream and Excelerate Energy

Considering the 90-day investment horizon DT Midstream is expected to generate 1.78 times less return on investment than Excelerate Energy. But when comparing it to its historical volatility, DT Midstream is 1.94 times less risky than Excelerate Energy. It trades about 0.34 of its potential returns per unit of risk. Excelerate Energy is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest  1,819  in Excelerate Energy on August 30, 2024 and sell it today you would earn a total of  1,250  from holding Excelerate Energy or generate 68.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

DT Midstream  vs.  Excelerate Energy

DT Midstream

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 26 (%) 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.

Excelerate Energy

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Excelerate Energy are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Excelerate Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with DT Midstream and Excelerate Energy

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

The idea behind DT Midstream and Excelerate Energy 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.

Check out your portfolio center.

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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.