Correlation Between Dorian LPG and Plains GP

Can any of the company-specific risk be diversified away by investing in both Dorian LPG and Plains GP 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 Dorian LPG and Plains GP into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Dorian LPG and Plains GP Holdings, you can compare the effects of market volatilities on Dorian LPG and Plains GP 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 Dorian LPG with a short position of Plains GP. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorian LPG and Plains GP.

Diversification Opportunities for Dorian LPG and Plains GP

-0.46

Correlation Coefficient

Dorian LPG  Plains GP

Very good diversification

The 3 months correlation between Dorian and Plains is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Dorian LPG and Plains GP Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plains GP Holdings and Dorian LPG 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 Dorian LPG are associated (or correlated) with Plains GP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plains GP Holdings has no effect on the direction of Dorian LPG i.e., Dorian LPG and Plains GP go up and down completely randomly.

Pair Corralation between Dorian LPG and Plains GP

Considering the 90-day investment horizon Dorian LPG is expected to generate 1.7 times more return on investment than Plains GP. However, Dorian LPG is 1.7 times more volatile than Plains GP Holdings. It trades about 0.15 of its potential returns per unit of risk. Plains GP Holdings is currently generating about -0.28 per unit of risk. If you would invest  2,340  in Dorian LPG on October 6, 2024 and sell it today you would earn a total of  151.00  from holding Dorian LPG or generate 6.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Dorian LPG  vs.  Plains GP Holdings

Dorian LPG

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Dorian LPG has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Plains GP Holdings

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Plains GP Holdings are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable technical and fundamental indicators, Plains GP 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 Dorian LPG and Plains GP

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

The idea behind Dorian LPG and Plains GP Holdings 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.