Correlation Between NGL Energy and Dynagas LNG

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

Diversification Opportunities for NGL Energy and Dynagas LNG

0.64

Correlation Coefficient

NGL Energy  Dynagas LNG

Poor diversification

The 3 months correlation between NGL and Dynagas is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners 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 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 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 NGL Energy i.e., NGL Energy and Dynagas LNG go up and down completely randomly.

Pair Corralation between NGL Energy and Dynagas LNG

Considering the 90-day investment horizon NGL Energy Partners is expected to generate 1.7 times more return on investment than Dynagas LNG. However, NGL Energy is 1.7 times more volatile than Dynagas LNG Partners. It trades about 0.01 of its potential returns per unit of risk. Dynagas LNG Partners is currently generating about -0.21 per unit of risk. If you would invest  474.00  in NGL Energy Partners on December 27, 2024 and sell it today you would lose (11.00) from holding NGL Energy Partners or give up 2.32% of portfolio value over 90 days.

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

NGL Energy Partners  vs.  Dynagas LNG Partners

NGL Energy Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days NGL Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, NGL Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Dynagas LNG Partners

Risk-Adjusted Performance

Very Weak

Over the last 90 days Dynagas LNG Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with NGL Energy and Dynagas LNG

The main advantage of trading using opposite NGL Energy and Dynagas LNG positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy 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 NGL Energy Partners 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.