Correlation Between Enterprise Products and MPLX LP

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

Diversification Opportunities for Enterprise Products and MPLX LP

0.91

Correlation Coefficient

Enterprise Products  MPLX LP

Almost no diversification

The 3 months correlation between Enterprise and MPLX is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and MPLX LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MPLX LP 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 MPLX LP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MPLX LP has no effect on the direction of Enterprise Products i.e., Enterprise Products and MPLX LP go up and down completely randomly.

Pair Corralation between Enterprise Products and MPLX LP

Considering the 90-day investment horizon Enterprise Products is expected to generate 1.38 times less return on investment than MPLX LP. But when comparing it to its historical volatility, Enterprise Products Partners is 1.35 times less risky than MPLX LP. It trades about 0.17 of its potential returns per unit of risk. MPLX LP is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  4,681  in MPLX LP on December 29, 2024 and sell it today you would earn a total of  687.00  from holding MPLX LP or generate 14.68% return on investment over 90 days.

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

Enterprise Products Partners  vs.  MPLX LP

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.

MPLX LP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MPLX LP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, MPLX LP showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Enterprise Products and MPLX LP

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

The idea behind Enterprise Products Partners and MPLX 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.