Correlation Between NGL Energy and Brooge Holdings

Can any of the company-specific risk be diversified away by investing in both NGL Energy and Brooge Holdings 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 NGL Energy and Brooge Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for NGL Energy and Brooge Holdings

-0.39

Correlation Coefficient

NGL Energy  Brooge Holdings

Very good diversification

The 3 months correlation between NGL and Brooge is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Brooge Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Brooge Holdings and NGL Energy 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 NGL Energy Partners are associated (or correlated) with Brooge Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Brooge Holdings has no effect on the direction of NGL Energy i.e., NGL Energy and Brooge Holdings go up and down completely randomly.

Pair Corralation between NGL Energy and Brooge Holdings

Assuming the 90 days trading horizon NGL Energy Partners is expected to generate 0.06 times more return on investment than Brooge Holdings. However, NGL Energy Partners is 16.62 times less risky than Brooge Holdings. It trades about 0.16 of its potential returns per unit of risk. Brooge Holdings is currently generating about 0.01 per unit of risk. If you would invest  2,316  in NGL Energy Partners on December 28, 2024 and sell it today you would earn a total of  89.00  from holding NGL Energy Partners or generate 3.84% return on investment over 90 days.

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

NGL Energy Partners  vs.  Brooge Holdings

NGL Energy Partners

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, NGL Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Brooge Holdings

Risk-Adjusted Performance

Weak

Over the last 90 days Brooge Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Brooge Holdings is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with NGL Energy and Brooge Holdings

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

The idea behind NGL Energy Partners and Brooge 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.