Correlation Between Energy Transfer and Topaz Energy

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

Diversification Opportunities for Energy Transfer and Topaz Energy

-0.01

Correlation Coefficient

Energy Transfer  Topaz Energy

Good diversification

The 3 months correlation between Energy and Topaz is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Topaz Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Topaz Energy Corp 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 Topaz Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Topaz Energy Corp has no effect on the direction of Energy Transfer i.e., Energy Transfer and Topaz Energy go up and down completely randomly.

Pair Corralation between Energy Transfer and Topaz Energy

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 0.69 times more return on investment than Topaz Energy. However, Energy Transfer LP is 1.45 times less risky than Topaz Energy. It trades about 0.12 of its potential returns per unit of risk. Topaz Energy Corp is currently generating about 0.05 per unit of risk. If you would invest  1,091  in Energy Transfer LP on October 12, 2024 and sell it today you would earn a total of  882.00  from holding Energy Transfer LP or generate 80.84% return on investment over 90 days.

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

Energy Transfer LP  vs.  Topaz Energy Corp

Energy Transfer LP

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 19 (%) 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.

Topaz Energy Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Topaz Energy Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Topaz Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Energy Transfer and Topaz Energy

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

The idea behind Energy Transfer LP and Topaz Energy Corp 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.