Correlation Between Energy Transfer and Brinks

Can any of the company-specific risk be diversified away by investing in both Energy Transfer and Brinks 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 Brinks 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 Brinks Co 4625, you can compare the effects of market volatilities on Energy Transfer and Brinks 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 Brinks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Energy Transfer and Brinks.

Diversification Opportunities for Energy Transfer and Brinks

0.26

Correlation Coefficient

Energy Transfer  Brinks

Modest diversification

The 3 months correlation between Energy and Brinks is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Energy Transfer LP and Brinks Co 4625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brinks Co 4625 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 Brinks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brinks Co 4625 has no effect on the direction of Energy Transfer i.e., Energy Transfer and Brinks go up and down completely randomly.

Pair Corralation between Energy Transfer and Brinks

Allowing for the 90-day total investment horizon Energy Transfer LP is expected to generate 2.0 times more return on investment than Brinks. However, Energy Transfer is 2.0 times more volatile than Brinks Co 4625. It trades about 0.0 of its potential returns per unit of risk. Brinks Co 4625 is currently generating about -0.11 per unit of risk. If you would invest  1,874  in Energy Transfer LP on December 21, 2024 and sell it today you would lose (14.00) from holding Energy Transfer LP or give up 0.75% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	86.67%
Values	Daily Returns

Energy Transfer LP  vs.  Brinks Co 4625

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.

Brinks Co 4625

Risk-Adjusted Performance

Very Weak

Over the last 90 days Brinks Co 4625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Brinks is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Energy Transfer and Brinks

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

The idea behind Energy Transfer LP and Brinks Co 4625 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.