Correlation Between MPLX LP and Cool
Can any of the company-specific risk be diversified away by investing in both MPLX LP and Cool 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 MPLX LP and Cool into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MPLX LP and Cool Company, you can compare the effects of market volatilities on MPLX LP and Cool 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 MPLX LP with a short position of Cool. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPLX LP and Cool.
Diversification Opportunities for MPLX LP and Cool
Pay attention - limited upside
The 3 months correlation between MPLX and Cool is -0.84. Overlapping area represents the amount of risk that can be diversified away by holding MPLX LP and Cool Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cool Company and MPLX LP 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 MPLX LP are associated (or correlated) with Cool. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cool Company has no effect on the direction of MPLX LP i.e., MPLX LP and Cool go up and down completely randomly.
Pair Corralation between MPLX LP and Cool
Given the investment horizon of 90 days MPLX LP is expected to generate 0.38 times more return on investment than Cool. However, MPLX LP is 2.6 times less risky than Cool. It trades about 0.19 of its potential returns per unit of risk. Cool Company is currently generating about -0.21 per unit of risk. If you would invest 4,243 in MPLX LP on September 12, 2024 and sell it today you would earn a total of 532.00 from holding MPLX LP or generate 12.54% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
MPLX LP vs. Cool Company
Performance |
Timeline |
MPLX LP |
Cool Company |
MPLX LP and Cool Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MPLX LP and Cool
The main advantage of trading using opposite MPLX LP and Cool positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MPLX LP position performs unexpectedly, Cool 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 Cool will offset losses from the drop in Cool's long position.MPLX LP vs. ONEOK Inc | MPLX LP vs. Enterprise Products Partners | MPLX LP vs. Energy Transfer LP | MPLX LP vs. Plains All American |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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