Correlation Between Hess Midstream and EnLink Midstream

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

Diversification Opportunities for Hess Midstream and EnLink Midstream

-0.16

Correlation Coefficient

Hess Midstream  EnLink Midstream

Good diversification

The 3 months correlation between Hess and EnLink is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and EnLink Midstream LLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on EnLink Midstream LLC 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 EnLink Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of EnLink Midstream LLC has no effect on the direction of Hess Midstream i.e., Hess Midstream and EnLink Midstream go up and down completely randomly.

Pair Corralation between Hess Midstream and EnLink Midstream

Given the investment horizon of 90 days Hess Midstream Partners is expected to generate 1.05 times more return on investment than EnLink Midstream. However, Hess Midstream is 1.05 times more volatile than EnLink Midstream LLC. It trades about 0.17 of its potential returns per unit of risk. EnLink Midstream LLC is currently generating about -0.01 per unit of risk. If you would invest  3,639  in Hess Midstream Partners on December 28, 2024 and sell it today you would earn a total of  598.00  from holding Hess Midstream Partners or generate 16.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	36.67%
Values	Daily Returns

Hess Midstream Partners  vs.  EnLink Midstream LLC

Hess Midstream Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Hess Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

EnLink Midstream LLC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Hess Midstream and EnLink Midstream

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

The idea behind Hess Midstream Partners and EnLink Midstream LLC 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.