Correlation Between DT Midstream and Genesis Energy

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

Diversification Opportunities for DT Midstream and Genesis Energy

-0.73

Correlation Coefficient

DT Midstream  Genesis Energy

Pay attention - limited upside

The 3 months correlation between DTM and Genesis is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding DT Midstream and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP 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 Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of DT Midstream i.e., DT Midstream and Genesis Energy go up and down completely randomly.

Pair Corralation between DT Midstream and Genesis Energy

Considering the 90-day investment horizon DT Midstream is expected to generate 0.65 times more return on investment than Genesis Energy. However, DT Midstream is 1.54 times less risky than Genesis Energy. It trades about 0.37 of its potential returns per unit of risk. Genesis Energy LP is currently generating about -0.07 per unit of risk. If you would invest  7,642  in DT Midstream on September 2, 2024 and sell it today you would earn a total of  2,970  from holding DT Midstream or generate 38.86% return on investment over 90 days.

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

DT Midstream  vs.  Genesis Energy LP

DT Midstream

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 29 (%) 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.

Genesis Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genesis Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with DT Midstream and Genesis Energy

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

The idea behind DT Midstream and Genesis Energy LP 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.