Correlation Between Genesis Energy and Enterprise Products

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

Diversification Opportunities for Genesis Energy and Enterprise Products

0.6

Correlation Coefficient

Genesis Energy  Enterprise Products

Poor diversification

The 3 months correlation between Genesis and Enterprise is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Energy LP and Enterprise Products Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enterprise Products 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 Enterprise Products. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enterprise Products has no effect on the direction of Genesis Energy i.e., Genesis Energy and Enterprise Products go up and down completely randomly.

Pair Corralation between Genesis Energy and Enterprise Products

Considering the 90-day investment horizon Genesis Energy LP is expected to generate 2.67 times more return on investment than Enterprise Products. However, Genesis Energy is 2.67 times more volatile than Enterprise Products Partners. It trades about 0.07 of its potential returns per unit of risk. Enterprise Products Partners is currently generating about -0.02 per unit of risk. If you would invest  1,173  in Genesis Energy LP on December 1, 2024 and sell it today you would earn a total of  111.00  from holding Genesis Energy LP or generate 9.46% return on investment over 90 days.

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

Genesis Energy LP  vs.  Enterprise Products Partners

Genesis Energy LP

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Energy LP are ranked lower than 5 (%) 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 April 2025.

Enterprise Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days Enterprise Products Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Enterprise Products is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Genesis Energy and Enterprise Products

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

The idea behind Genesis Energy LP and Enterprise Products Partners 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.