Correlation Between Genesis Energy and NGL Energy

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

Diversification Opportunities for Genesis Energy and NGL Energy

0.33
  Correlation Coefficient

Weak diversification

The 3 months correlation between Genesis and NGL is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Energy LP and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners 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 NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Genesis Energy i.e., Genesis Energy and NGL Energy go up and down completely randomly.

Pair Corralation between Genesis Energy and NGL Energy

Considering the 90-day investment horizon Genesis Energy LP is expected to generate 4.14 times more return on investment than NGL Energy. However, Genesis Energy is 4.14 times more volatile than NGL Energy Partners. It trades about 0.29 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.1 per unit of risk. If you would invest  988.00  in Genesis Energy LP on December 28, 2024 and sell it today you would earn a total of  588.00  from holding Genesis Energy LP or generate 59.51% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Genesis Energy LP  vs.  NGL Energy Partners

 Performance 
       Timeline  
Genesis Energy LP 

Risk-Adjusted Performance

Solid

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in Genesis Energy LP are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Genesis Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.
NGL Energy Partners 

Risk-Adjusted Performance

OK

 
Weak
 
Strong
Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Genesis Energy and NGL Energy Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Genesis Energy and NGL Energy

The main advantage of trading using opposite Genesis Energy and NGL Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Genesis Energy position performs unexpectedly, NGL 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 NGL Energy will offset losses from the drop in NGL Energy's long position.
The idea behind Genesis Energy LP and NGL Energy 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.
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 Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.

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