Correlation Between DT Midstream and SMLP Old

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

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

Diversification Opportunities for DT Midstream and SMLP Old

0.58

Correlation Coefficient

DT Midstream  SMLP Old

Very weak diversification

The 3 months correlation between DTM and SMLP is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding DT Midstream and SMLP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMLP Old 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 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 DT Midstream i.e., DT Midstream and SMLP Old go up and down completely randomly.

Pair Corralation between DT Midstream and SMLP Old

If you would invest  8,314  in DT Midstream on October 10, 2024 and sell it today you would earn a total of  2,035  from holding DT Midstream or generate 24.48% return on investment over 90 days.

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

DT Midstream  vs.  SMLP Old

DT Midstream

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in DT Midstream are ranked lower than 16 (%) 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.

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 DT Midstream and SMLP Old

The main advantage of trading using opposite DT Midstream and SMLP Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DT Midstream 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 DT Midstream 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.