Correlation Between Genesis Energy and SMLP Old

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

Diversification Opportunities for Genesis Energy and SMLP Old

-0.59

Correlation Coefficient

Genesis Energy  SMLP Old

Excellent diversification

The 3 months correlation between Genesis and SMLP is -0.59. Overlapping area represents the amount of risk that can be diversified away by holding Genesis Energy LP and SMLP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMLP Old 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 SMLP Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SMLP Old has no effect on the direction of Genesis Energy i.e., Genesis Energy and SMLP Old go up and down completely randomly.

Pair Corralation between Genesis Energy and SMLP Old

Considering the 90-day investment horizon Genesis Energy LP is expected to generate 0.21 times more return on investment than SMLP Old. However, Genesis Energy LP is 4.71 times less risky than SMLP Old. It trades about -0.01 of its potential returns per unit of risk. SMLP Old is currently generating about -0.01 per unit of risk. If you would invest  1,148  in Genesis Energy LP on October 9, 2024 and sell it today you would lose (93.00) from holding Genesis Energy LP or give up 8.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	55.87%
Values	Daily Returns

Genesis Energy LP  vs.  SMLP Old

Genesis Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Genesis Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in February 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

SMLP Old

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SMLP Old has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, SMLP Old is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Genesis Energy and SMLP Old

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

The idea behind Genesis Energy LP and SMLP Old 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.