Correlation Between Energy Transfer and Genesis Energy

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

By analyzing existing cross correlation between Energy Transfer LP and Genesis Energy LP, you can compare the effects of market volatilities on Energy Transfer and Genesis 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 Energy Transfer with a short position of Genesis Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Transfer and Genesis Energy.

Diversification Opportunities for Energy Transfer and Genesis Energy

-0.46

Correlation Coefficient

Energy Transfer  Genesis Energy

Very good diversification

The 3 months correlation between Energy and Genesis is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP and Energy Transfer 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 Energy Transfer LP are associated (or correlated) with Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of Energy Transfer i.e., Energy Transfer and Genesis Energy go up and down completely randomly.

Pair Corralation between Energy Transfer and Genesis Energy

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to under-perform the Genesis Energy. But the stock apears to be less risky and, when comparing its historical volatility, Energy Transfer LP is 1.6 times less risky than Genesis Energy. The stock trades about -0.01 of its potential returns per unit of risk. The Genesis Energy LP is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  988.00  in Genesis Energy LP on December 28, 2024 and sell it today you would earn a total of  588.00  from holding Genesis Energy LP or generate 59.51% return on investment over 90 days.

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

Energy Transfer LP  vs.  Genesis Energy LP

Energy Transfer LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days Energy Transfer LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Energy Transfer is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Genesis Energy LP

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Energy LP are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Genesis Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Energy Transfer and Genesis Energy

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

The idea behind Energy Transfer LP and Genesis Energy 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.