Correlation Between Natural Gas and CSI Compressco

Can any of the company-specific risk be diversified away by investing in both Natural Gas and CSI Compressco 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 Natural Gas and CSI Compressco into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Natural Gas Services and CSI Compressco LP, you can compare the effects of market volatilities on Natural Gas and CSI Compressco 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 Natural Gas with a short position of CSI Compressco. Check out your portfolio center. Please also check ongoing floating volatility patterns of Natural Gas and CSI Compressco.

Diversification Opportunities for Natural Gas and CSI Compressco

-0.06

Correlation Coefficient

Natural Gas  CSI Compressco

Good diversification

The 3 months correlation between Natural and CSI is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Natural Gas Services and CSI Compressco LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CSI Compressco LP and Natural Gas 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 Natural Gas Services are associated (or correlated) with CSI Compressco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CSI Compressco LP has no effect on the direction of Natural Gas i.e., Natural Gas and CSI Compressco go up and down completely randomly.

Pair Corralation between Natural Gas and CSI Compressco

Considering the 90-day investment horizon Natural Gas Services is expected to generate 0.83 times more return on investment than CSI Compressco. However, Natural Gas Services is 1.21 times less risky than CSI Compressco. It trades about 0.08 of its potential returns per unit of risk. CSI Compressco LP is currently generating about -0.01 per unit of risk. If you would invest  1,109  in Natural Gas Services on September 13, 2024 and sell it today you would earn a total of  1,588  from holding Natural Gas Services or generate 143.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	29.29%
Values	Daily Returns

Natural Gas Services  vs.  CSI Compressco LP

Natural Gas Services

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Natural Gas Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain technical and fundamental indicators, Natural Gas unveiled solid returns over the last few months and may actually be approaching a breakup point.

CSI Compressco LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CSI Compressco LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable essential indicators, CSI Compressco is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Natural Gas and CSI Compressco

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

The idea behind Natural Gas Services and CSI Compressco 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.