Correlation Between Energy Transfer and Rotork Plc

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

Diversification Opportunities for Energy Transfer and Rotork Plc

0.03

Correlation Coefficient

Energy Transfer  Rotork Plc

Significant diversification

The 3 months correlation between Energy and Rotork is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Rotork plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rotork plc 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 Rotork Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rotork plc has no effect on the direction of Energy Transfer i.e., Energy Transfer and Rotork Plc go up and down completely randomly.

Pair Corralation between Energy Transfer and Rotork Plc

Allowing for the 90-day total investment horizon Energy Transfer is expected to generate 639.0 times less return on investment than Rotork Plc. But when comparing it to its historical volatility, Energy Transfer LP is 2.54 times less risky than Rotork Plc. It trades about 0.0 of its potential returns per unit of risk. Rotork plc is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  389.00  in Rotork plc on December 2, 2024 and sell it today you would lose (4.00) from holding Rotork plc or give up 1.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	95.0%
Values	Daily Returns

Energy Transfer LP  vs.  Rotork plc

Energy Transfer LP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

Rotork plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Rotork plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Rotork Plc

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

The idea behind Energy Transfer LP and Rotork plc 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.