Correlation Between Enterprise Products and DT Midstream

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

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

Diversification Opportunities for Enterprise Products and DT Midstream

-0.14

Correlation Coefficient

Enterprise Products  DT Midstream

Good diversification

The 3 months correlation between Enterprise and DTM is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream and Enterprise Products 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 Enterprise Products Partners are associated (or correlated) with DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Enterprise Products i.e., Enterprise Products and DT Midstream go up and down completely randomly.

Pair Corralation between Enterprise Products and DT Midstream

Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 0.4 times more return on investment than DT Midstream. However, Enterprise Products Partners is 2.51 times less risky than DT Midstream. It trades about 0.18 of its potential returns per unit of risk. DT Midstream is currently generating about 0.0 per unit of risk. If you would invest  3,071  in Enterprise Products Partners on December 28, 2024 and sell it today you would earn a total of  324.00  from holding Enterprise Products Partners or generate 10.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Enterprise Products Partners  vs.  DT Midstream

Enterprise Products

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Products may actually be approaching a critical reversion point that can send shares even higher in April 2025.

DT Midstream

Risk-Adjusted Performance

Very Weak

Over the last 90 days DT Midstream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, DT Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enterprise Products and DT Midstream

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

The idea behind Enterprise Products Partners and DT Midstream 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.

Check out your portfolio center.

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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.