Correlation Between Energy Transfer and Newtopia

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

Diversification Opportunities for Energy Transfer and Newtopia

-0.77

Correlation Coefficient

Energy Transfer  Newtopia

Pay attention - limited upside

The 3 months correlation between Energy and Newtopia is -0.77. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Newtopia in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Newtopia 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 Newtopia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Newtopia has no effect on the direction of Energy Transfer i.e., Energy Transfer and Newtopia go up and down completely randomly.

Pair Corralation between Energy Transfer and Newtopia

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 6.98 times less return on investment than Newtopia. But when comparing it to its historical volatility, Energy Transfer LP is 23.1 times less risky than Newtopia. It trades about 0.14 of its potential returns per unit of risk. Newtopia is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  5.20  in Newtopia on September 12, 2024 and sell it today you would lose (4.64) from holding Newtopia or give up 89.23% of portfolio value over 90 days.

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

Energy Transfer LP  vs.  Newtopia

Energy Transfer LP

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer unveiled solid returns over the last few months and may actually be approaching a breakup point.

Newtopia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Newtopia has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Energy Transfer and Newtopia

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

The idea behind Energy Transfer LP and Newtopia 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..