Correlation Between Dorian LPG and Pembina Pipeline

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

By analyzing existing cross correlation between Dorian LPG and Pembina Pipeline Corp, you can compare the effects of market volatilities on Dorian LPG and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dorian LPG and Pembina Pipeline.

Diversification Opportunities for Dorian LPG and Pembina Pipeline

0.26

Correlation Coefficient

Dorian LPG  Pembina Pipeline

Modest diversification

The 3 months correlation between Dorian and Pembina is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Dorian LPG and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Dorian LPG i.e., Dorian LPG and Pembina Pipeline go up and down completely randomly.

Pair Corralation between Dorian LPG and Pembina Pipeline

Considering the 90-day investment horizon Dorian LPG is expected to under-perform the Pembina Pipeline. In addition to that, Dorian LPG is 2.22 times more volatile than Pembina Pipeline Corp. It trades about -0.08 of its total potential returns per unit of risk. Pembina Pipeline Corp is currently generating about -0.17 per unit of volatility. If you would invest  4,085  in Pembina Pipeline Corp on November 29, 2024 and sell it today you would lose (465.00) from holding Pembina Pipeline Corp or give up 11.38% of portfolio value over 90 days.

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

Dorian LPG  vs.  Pembina Pipeline Corp

Dorian LPG

Risk-Adjusted Performance

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 March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pembina Pipeline Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Pembina Pipeline Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Dorian LPG and Pembina Pipeline

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

The idea behind Dorian LPG and Pembina Pipeline Corp 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.