Correlation Between Alerian Energy and USCF Midstream

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

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

Diversification Opportunities for Alerian Energy and USCF Midstream

0.98

Correlation Coefficient

Alerian Energy  USCF Midstream

Almost no diversification

The 3 months correlation between Alerian and USCF is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Alerian Energy Infrastructure and USCF Midstream Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on USCF Midstream Energy and Alerian Energy 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 Alerian Energy Infrastructure are associated (or correlated) with USCF Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of USCF Midstream Energy has no effect on the direction of Alerian Energy i.e., Alerian Energy and USCF Midstream go up and down completely randomly.

Pair Corralation between Alerian Energy and USCF Midstream

Given the investment horizon of 90 days Alerian Energy Infrastructure is expected to generate 0.96 times more return on investment than USCF Midstream. However, Alerian Energy Infrastructure is 1.04 times less risky than USCF Midstream. It trades about 0.1 of its potential returns per unit of risk. USCF Midstream Energy is currently generating about 0.1 per unit of risk. If you would invest  3,051  in Alerian Energy Infrastructure on December 27, 2024 and sell it today you would earn a total of  230.00  from holding Alerian Energy Infrastructure or generate 7.54% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Alerian Energy Infrastructure  vs.  USCF Midstream Energy

Alerian Energy Infra

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alerian Energy Infrastructure are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, Alerian Energy may actually be approaching a critical reversion point that can send shares even higher in April 2025.

USCF Midstream Energy

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in USCF Midstream Energy are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly conflicting primary indicators, USCF Midstream may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Alerian Energy and USCF Midstream

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

The idea behind Alerian Energy Infrastructure and USCF Midstream 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.

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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.