Correlation Between EnLink Midstream and Cheniere Energy

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

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

Diversification Opportunities for EnLink Midstream and Cheniere Energy

0.88

Correlation Coefficient

EnLink Midstream  Cheniere Energy

Very poor diversification

The 3 months correlation between EnLink and Cheniere is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC and Cheniere Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cheniere Energy Partners and EnLink 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 EnLink Midstream LLC are associated (or correlated) with Cheniere Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cheniere Energy Partners has no effect on the direction of EnLink Midstream i.e., EnLink Midstream and Cheniere Energy go up and down completely randomly.

Pair Corralation between EnLink Midstream and Cheniere Energy

Given the investment horizon of 90 days EnLink Midstream is expected to generate 1.9 times less return on investment than Cheniere Energy. But when comparing it to its historical volatility, EnLink Midstream LLC is 1.45 times less risky than Cheniere Energy. It trades about 0.16 of its potential returns per unit of risk. Cheniere Energy Partners is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,784  in Cheniere Energy Partners on September 4, 2024 and sell it today you would earn a total of  929.00  from holding Cheniere Energy Partners or generate 19.42% return on investment over 90 days.

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

EnLink Midstream LLC  vs.  Cheniere Energy Partners

EnLink Midstream LLC

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in EnLink Midstream LLC are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak essential indicators, EnLink Midstream may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cheniere Energy Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EnLink Midstream and Cheniere Energy

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

The idea behind EnLink Midstream LLC and Cheniere Energy Partners 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.