Correlation Between Hess Midstream and SMLP Old

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

Diversification Opportunities for Hess Midstream and SMLP Old

0.62

Correlation Coefficient

Hess Midstream  SMLP Old

Poor diversification

The 3 months correlation between Hess and SMLP is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and SMLP Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SMLP Old 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 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 Hess Midstream i.e., Hess Midstream and SMLP Old go up and down completely randomly.

Pair Corralation between Hess Midstream and SMLP Old

If you would invest  3,601  in Hess Midstream Partners on October 10, 2024 and sell it today you would earn a total of  192.00  from holding Hess Midstream Partners or generate 5.33% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	0.0%
Values	Daily Returns

Hess Midstream Partners  vs.  SMLP Old

Hess Midstream Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hess Midstream Partners are ranked lower than 8 (%) 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.

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 Hess Midstream and SMLP Old

The main advantage of trading using opposite Hess Midstream and SMLP Old positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hess Midstream 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 Hess Midstream Partners 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.