Correlation Between Enterprise Products and NGL Energy

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

Diversification Opportunities for Enterprise Products and NGL Energy

0.76

Correlation Coefficient

Enterprise Products  NGL Energy

Poor diversification

The 3 months correlation between Enterprise and NGL is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy 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 NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Enterprise Products i.e., Enterprise Products and NGL Energy go up and down completely randomly.

Pair Corralation between Enterprise Products and NGL Energy

Considering the 90-day investment horizon Enterprise Products Partners is expected to under-perform the NGL Energy. In addition to that, Enterprise Products is 1.86 times more volatile than NGL Energy Partners. It trades about -0.08 of its total potential returns per unit of risk. NGL Energy Partners is currently generating about 0.24 per unit of volatility. If you would invest  2,301  in NGL Energy Partners on September 26, 2024 and sell it today you would earn a total of  87.00  from holding NGL Energy Partners or generate 3.78% 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.  NGL Energy Partners

Enterprise Products

Risk-Adjusted Performance

13 of 100

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 January 2025.

NGL Energy Partners

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, NGL Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Enterprise Products and NGL Energy

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

The idea behind Enterprise Products Partners and NGL Energy 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.

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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.