Correlation Between EnLink Midstream and Energy Transfer

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

Diversification Opportunities for EnLink Midstream and Energy Transfer

-0.52

Correlation Coefficient

EnLink Midstream  Energy Transfer

Excellent diversification

The 3 months correlation between EnLink and Energy is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP 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 Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of EnLink Midstream i.e., EnLink Midstream and Energy Transfer go up and down completely randomly.

Pair Corralation between EnLink Midstream and Energy Transfer

Given the investment horizon of 90 days EnLink Midstream LLC is expected to under-perform the Energy Transfer. In addition to that, EnLink Midstream is 2.49 times more volatile than Energy Transfer LP. It trades about -0.02 of its total potential returns per unit of risk. Energy Transfer LP is currently generating about 0.06 per unit of volatility. If you would invest  1,152  in Energy Transfer LP on December 26, 2024 and sell it today you would earn a total of  24.00  from holding Energy Transfer LP or generate 2.08% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	40.0%
Values	Daily Returns

EnLink Midstream LLC  vs.  Energy Transfer LP

EnLink Midstream LLC

Risk-Adjusted Performance

Very Weak

Over the last 90 days EnLink Midstream LLC has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound essential indicators, EnLink Midstream is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Energy Transfer LP

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with EnLink Midstream and Energy Transfer

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

The idea behind EnLink Midstream LLC and Energy Transfer 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .