Correlation Between Enterprise Products and Hess Midstream

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

Diversification Opportunities for Enterprise Products and Hess Midstream

0.68

Correlation Coefficient

Enterprise Products  Hess Midstream

Poor diversification

The 3 months correlation between Enterprise and Hess is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and Hess Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hess Midstream Partners 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 Hess Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hess Midstream Partners has no effect on the direction of Enterprise Products i.e., Enterprise Products and Hess Midstream go up and down completely randomly.

Pair Corralation between Enterprise Products and Hess Midstream

Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 0.74 times more return on investment than Hess Midstream. However, Enterprise Products Partners is 1.36 times less risky than Hess Midstream. It trades about 0.36 of its potential returns per unit of risk. Hess Midstream Partners is currently generating about 0.08 per unit of risk. If you would invest  2,863  in Enterprise Products Partners on September 3, 2024 and sell it today you would earn a total of  580.00  from holding Enterprise Products Partners or generate 20.26% return on investment over 90 days.

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

Enterprise Products Partners  vs.  Hess Midstream Partners

Enterprise Products

Risk-Adjusted Performance

28 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 28 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Enterprise Products exhibited solid returns over the last few months and may actually be approaching a breakup point.

Hess Midstream Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, Hess Midstream is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Enterprise Products and Hess Midstream

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

The idea behind Enterprise Products Partners and Hess Midstream 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.