Correlation Between Hess Midstream and Williams Companies

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

Diversification Opportunities for Hess Midstream and Williams Companies

0.73

Correlation Coefficient

Hess Midstream  Williams Companies

Poor diversification

The 3 months correlation between Hess and Williams is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Hess Midstream Partners and Williams Companies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Williams Companies 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 Williams Companies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Williams Companies has no effect on the direction of Hess Midstream i.e., Hess Midstream and Williams Companies go up and down completely randomly.

Pair Corralation between Hess Midstream and Williams Companies

Given the investment horizon of 90 days Hess Midstream Partners is expected to generate 0.79 times more return on investment than Williams Companies. However, Hess Midstream Partners is 1.27 times less risky than Williams Companies. It trades about 0.17 of its potential returns per unit of risk. Williams Companies is currently generating about 0.09 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 Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Hess Midstream Partners  vs.  Williams Companies

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.

Williams Companies

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Williams Companies are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady primary indicators, Williams Companies may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hess Midstream and Williams Companies

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

The idea behind Hess Midstream Partners and Williams Companies 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.