Correlation Between Green Plains and NuStar Energy

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

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

Diversification Opportunities for Green Plains and NuStar Energy

0.44

Correlation Coefficient

Green Plains  NuStar Energy

Very weak diversification

The 3 months correlation between Green and NuStar is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Green Plains Partners and NuStar Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuStar Energy LP and Green Plains 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 Green Plains Partners are associated (or correlated) with NuStar Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuStar Energy LP has no effect on the direction of Green Plains i.e., Green Plains and NuStar Energy go up and down completely randomly.

Pair Corralation between Green Plains and NuStar Energy

If you would invest  1,734  in NuStar Energy LP on September 2, 2024 and sell it today you would earn a total of  0.00  from holding NuStar Energy LP or generate 0.0% return on investment over 90 days.

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

Green Plains Partners  vs.  NuStar Energy LP

Green Plains Partners

Risk-Adjusted Performance

0 of 100

Very Weak

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

NuStar Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuStar Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NuStar Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Green Plains and NuStar Energy

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

The idea behind Green Plains Partners and NuStar Energy LP 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.