Correlation Between Energy Transfer and Network International

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

Diversification Opportunities for Energy Transfer and Network International

0.75

Correlation Coefficient

Energy Transfer  Network International

Poor diversification

The 3 months correlation between Energy and Network is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Network International Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Network International 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 Network International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Network International has no effect on the direction of Energy Transfer i.e., Energy Transfer and Network International go up and down completely randomly.

Pair Corralation between Energy Transfer and Network International

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 27.86 times more return on investment than Network International. However, Energy Transfer is 27.86 times more volatile than Network International Holdings. It trades about 0.27 of its potential returns per unit of risk. Network International Holdings is currently generating about 0.21 per unit of risk. If you would invest  1,587  in Energy Transfer LP on September 13, 2024 and sell it today you would earn a total of  334.00  from holding Energy Transfer LP or generate 21.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	35.94%
Values	Daily Returns

Energy Transfer LP  vs.  Network International Holdings

Energy Transfer LP

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 21 (%) 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.

Network International

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Network International Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Network International is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Transfer and Network International

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

The idea behind Energy Transfer LP and Network International Holdings 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.