Correlation Between Genesis Energy and DT Midstream

Can any of the company-specific risk be diversified away by investing in both Genesis Energy and DT Midstream 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 Genesis Energy and DT Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Genesis Energy LP and DT Midstream, you can compare the effects of market volatilities on Genesis Energy and DT Midstream 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 Genesis Energy with a short position of DT Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Genesis Energy and DT Midstream.

Diversification Opportunities for Genesis Energy and DT Midstream

-0.11

Correlation Coefficient

Genesis Energy  DT Midstream

Good diversification

The 3 months correlation between Genesis and DTM is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Energy LP and DT Midstream in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DT Midstream and Genesis Energy 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 Genesis Energy LP are associated (or correlated) with DT Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DT Midstream has no effect on the direction of Genesis Energy i.e., Genesis Energy and DT Midstream go up and down completely randomly.

Pair Corralation between Genesis Energy and DT Midstream

Considering the 90-day investment horizon Genesis Energy LP is expected to generate 2.47 times more return on investment than DT Midstream. However, Genesis Energy is 2.47 times more volatile than DT Midstream. It trades about 0.24 of its potential returns per unit of risk. DT Midstream is currently generating about -0.19 per unit of risk. If you would invest  1,038  in Genesis Energy LP on November 29, 2024 and sell it today you would earn a total of  203.00  from holding Genesis Energy LP or generate 19.56% return on investment over 90 days.

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

Genesis Energy LP  vs.  DT Midstream

Genesis Energy LP

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Energy LP are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Genesis Energy may actually be approaching a critical reversion point that can send shares even higher in March 2025.

DT Midstream

Risk-Adjusted Performance

Very Weak

Over the last 90 days DT Midstream has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Genesis Energy and DT Midstream

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

The idea behind Genesis Energy LP and DT Midstream 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 Stocks Directory module to find actively traded stocks across global markets.