Correlation Between Hess Midstream and Genesis Energy

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

Diversification Opportunities for Hess Midstream and Genesis Energy

0.78

Correlation Coefficient

Hess Midstream  Genesis Energy

Poor diversification

The 3 months correlation between Hess and Genesis is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and Genesis Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Genesis Energy LP 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 Genesis Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Genesis Energy LP has no effect on the direction of Hess Midstream i.e., Hess Midstream and Genesis Energy go up and down completely randomly.

Pair Corralation between Hess Midstream and Genesis Energy

Given the investment horizon of 90 days Hess Midstream is expected to generate 3.07 times less return on investment than Genesis Energy. But when comparing it to its historical volatility, Hess Midstream Partners is 1.77 times less risky than Genesis Energy. It trades about 0.17 of its potential returns per unit of risk. Genesis Energy LP is currently generating about 0.29 of returns per unit of risk over similar time horizon. 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 Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hess Midstream Partners  vs.  Genesis Energy LP

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.

Genesis Energy LP

Risk-Adjusted Performance

Solid

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.

Pair Trading with Hess Midstream and Genesis Energy

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

The idea behind Hess Midstream Partners and Genesis 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.