Correlation Between Magellan Midstream and DCP Midstream
Can any of the company-specific risk be diversified away by investing in both Magellan Midstream and DCP Midstream 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 Magellan Midstream and DCP Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Magellan Midstream Partners and DCP Midstream LP, you can compare the effects of market volatilities on Magellan Midstream and DCP Midstream 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 Magellan Midstream with a short position of DCP Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Magellan Midstream and DCP Midstream.
Diversification Opportunities for Magellan Midstream and DCP Midstream
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Magellan and DCP is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Magellan Midstream Partners and DCP Midstream LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCP Midstream LP and Magellan 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 Magellan Midstream Partners are associated (or correlated) with DCP Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCP Midstream LP has no effect on the direction of Magellan Midstream i.e., Magellan Midstream and DCP Midstream go up and down completely randomly.
Pair Corralation between Magellan Midstream and DCP Midstream
If you would invest (100.00) in DCP Midstream LP on December 27, 2024 and sell it today you would earn a total of 100.00 from holding DCP Midstream LP or generate -100.0% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Flat |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Magellan Midstream Partners vs. DCP Midstream LP
Performance |
Timeline |
Magellan Midstream |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
DCP Midstream LP |
Risk-Adjusted Performance
Very Weak
Weak | Strong |
Magellan Midstream and DCP Midstream Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Magellan Midstream and DCP Midstream
The main advantage of trading using opposite Magellan Midstream and DCP Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Magellan Midstream position performs unexpectedly, DCP Midstream 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 DCP Midstream will offset losses from the drop in DCP Midstream's long position.Magellan Midstream vs. Kinder Morgan | Magellan Midstream vs. Enterprise Products Partners | Magellan Midstream vs. Williams Companies | Magellan Midstream vs. MPLX LP |
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Check out your portfolio center.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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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