Correlation Between EnLink Midstream and Petroleo Brasileiro

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

Diversification Opportunities for EnLink Midstream and Petroleo Brasileiro

-0.1

Correlation Coefficient

EnLink Midstream  Petroleo Brasileiro

Good diversification

The 3 months correlation between EnLink and Petroleo is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding EnLink Midstream LLC and Petroleo Brasileiro Petrobras in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Petroleo Brasileiro 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 Petroleo Brasileiro. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Petroleo Brasileiro has no effect on the direction of EnLink Midstream i.e., EnLink Midstream and Petroleo Brasileiro go up and down completely randomly.

Pair Corralation between EnLink Midstream and Petroleo Brasileiro

Given the investment horizon of 90 days EnLink Midstream LLC is expected to under-perform the Petroleo Brasileiro. But the stock apears to be less risky and, when comparing its historical volatility, EnLink Midstream LLC is 1.12 times less risky than Petroleo Brasileiro. The stock trades about -0.01 of its potential returns per unit of risk. The Petroleo Brasileiro Petrobras is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,275  in Petroleo Brasileiro Petrobras on December 29, 2024 and sell it today you would earn a total of  164.00  from holding Petroleo Brasileiro Petrobras or generate 12.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.07%
Values	Daily Returns

EnLink Midstream LLC  vs.  Petroleo Brasileiro Petrobras

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.

Petroleo Brasileiro

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Petroleo Brasileiro Petrobras are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady fundamental drivers, Petroleo Brasileiro reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with EnLink Midstream and Petroleo Brasileiro

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

The idea behind EnLink Midstream LLC and Petroleo Brasileiro Petrobras 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.