Correlation Between NGL Energy and GasLog Partners

Can any of the company-specific risk be diversified away by investing in both NGL Energy and GasLog Partners 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 GasLog Partners 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 GasLog Partners LP, you can compare the effects of market volatilities on NGL Energy and GasLog Partners 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 GasLog Partners. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and GasLog Partners.

Diversification Opportunities for NGL Energy and GasLog Partners

0.57

Correlation Coefficient

NGL Energy  GasLog Partners

Very weak diversification

The 3 months correlation between NGL and GasLog is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and GasLog Partners LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GasLog Partners LP 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 GasLog Partners. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GasLog Partners LP has no effect on the direction of NGL Energy i.e., NGL Energy and GasLog Partners go up and down completely randomly.

Pair Corralation between NGL Energy and GasLog Partners

Assuming the 90 days trading horizon NGL Energy is expected to generate 1.05 times less return on investment than GasLog Partners. But when comparing it to its historical volatility, NGL Energy Partners is 1.36 times less risky than GasLog Partners. It trades about 0.16 of its potential returns per unit of risk. GasLog Partners LP is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,475  in GasLog Partners LP on December 29, 2024 and sell it today you would earn a total of  98.00  from holding GasLog Partners LP or generate 3.96% return on investment over 90 days.

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

NGL Energy Partners  vs.  GasLog Partners LP

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.

GasLog Partners LP

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in GasLog Partners LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, GasLog Partners is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with NGL Energy and GasLog Partners

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

The idea behind NGL Energy Partners and GasLog Partners LP 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.