Correlation Between NuStar Energy and Western Midstream

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

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

Diversification Opportunities for NuStar Energy and Western Midstream

0.0

Correlation Coefficient

NuStar Energy  Western Midstream

Pay attention - limited upside

The 3 months correlation between NuStar and Western is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NuStar Energy LP and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream and NuStar 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 NuStar Energy LP are associated (or correlated) with Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of NuStar Energy i.e., NuStar Energy and Western Midstream go up and down completely randomly.

Pair Corralation between NuStar Energy and Western Midstream

If you would invest  3,830  in Western Midstream Partners on December 27, 2024 and sell it today you would earn a total of  289.00  from holding Western Midstream Partners or generate 7.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

NuStar Energy LP  vs.  Western Midstream Partners

NuStar Energy LP

Risk-Adjusted Performance

Very Weak

Over the last 90 days NuStar Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, NuStar Energy is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Western Midstream

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Western Midstream Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Western Midstream may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with NuStar Energy and Western Midstream

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

The idea behind NuStar Energy LP and Western Midstream 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.

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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.