Correlation Between Hess Midstream and CBL International

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

By analyzing existing cross correlation between Hess Midstream Partners and CBL International Limited, you can compare the effects of market volatilities on Hess Midstream and CBL International 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 Hess Midstream with a short position of CBL International. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hess Midstream and CBL International.

Diversification Opportunities for Hess Midstream and CBL International

0.05

Correlation Coefficient

Hess Midstream  CBL International

Significant diversification

The 3 months correlation between Hess and CBL is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and CBL International Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBL International and Hess Midstream 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 Hess Midstream Partners are associated (or correlated) with CBL International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBL International has no effect on the direction of Hess Midstream i.e., Hess Midstream and CBL International go up and down completely randomly.

Pair Corralation between Hess Midstream and CBL International

Given the investment horizon of 90 days Hess Midstream is expected to generate 1.07 times less return on investment than CBL International. But when comparing it to its historical volatility, Hess Midstream Partners is 7.01 times less risky than CBL International. It trades about 0.09 of its potential returns per unit of risk. CBL International Limited is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  442.00  in CBL International Limited on October 5, 2024 and sell it today you would lose (336.00) from holding CBL International Limited or give up 76.02% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.68%
Values	Daily Returns

Hess Midstream Partners  vs.  CBL International Limited

Hess Midstream Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hess Midstream may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CBL International

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in CBL International Limited are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, CBL International disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hess Midstream and CBL International

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

The idea behind Hess Midstream Partners and CBL International Limited 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.