Correlation Between MPLX LP and Dynagas LNG

Can any of the company-specific risk be diversified away by investing in both MPLX LP and Dynagas LNG 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 Dynagas LNG into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between MPLX LP and Dynagas LNG Partners, you can compare the effects of market volatilities on MPLX LP and Dynagas LNG 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 Dynagas LNG. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPLX LP and Dynagas LNG.

Diversification Opportunities for MPLX LP and Dynagas LNG

0.94

Correlation Coefficient

MPLX LP  Dynagas LNG

Almost no diversification

The 3 months correlation between MPLX and Dynagas is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding MPLX LP and Dynagas LNG Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynagas LNG Partners 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 Dynagas LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynagas LNG Partners has no effect on the direction of MPLX LP i.e., MPLX LP and Dynagas LNG go up and down completely randomly.

Pair Corralation between MPLX LP and Dynagas LNG

Given the investment horizon of 90 days MPLX LP is expected to generate 2.27 times less return on investment than Dynagas LNG. But when comparing it to its historical volatility, MPLX LP is 2.18 times less risky than Dynagas LNG. It trades about 0.1 of its potential returns per unit of risk. Dynagas LNG Partners is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  376.00  in Dynagas LNG Partners on September 20, 2024 and sell it today you would earn a total of  60.00  from holding Dynagas LNG Partners or generate 15.96% return on investment over 90 days.

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

MPLX LP  vs.  Dynagas LNG Partners

MPLX LP

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MPLX LP are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, MPLX LP may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Dynagas LNG Partners

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MPLX LP and Dynagas LNG

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

The idea behind MPLX LP and Dynagas LNG Partners 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.