Correlation Between ONEOK and Pembina Pipeline

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

By analyzing existing cross correlation between ONEOK Inc and Pembina Pipeline Corp, you can compare the effects of market volatilities on ONEOK and Pembina Pipeline 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 ONEOK with a short position of Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONEOK and Pembina Pipeline.

Diversification Opportunities for ONEOK and Pembina Pipeline

0.28

Correlation Coefficient

ONEOK  Pembina Pipeline

Modest diversification

The 3 months correlation between ONEOK and Pembina is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding ONEOK Inc and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp and ONEOK 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 ONEOK Inc are associated (or correlated) with Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of ONEOK i.e., ONEOK and Pembina Pipeline go up and down completely randomly.

Pair Corralation between ONEOK and Pembina Pipeline

Assuming the 90 days horizon ONEOK Inc is expected to under-perform the Pembina Pipeline. But the stock apears to be less risky and, when comparing its historical volatility, ONEOK Inc is 1.01 times less risky than Pembina Pipeline. The stock trades about -0.53 of its potential returns per unit of risk. The Pembina Pipeline Corp is currently generating about -0.42 of returns per unit of risk over similar time horizon. If you would invest  3,936  in Pembina Pipeline Corp on September 22, 2024 and sell it today you would lose (475.00) from holding Pembina Pipeline Corp or give up 12.07% of portfolio value over 90 days.

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

ONEOK Inc  vs.  Pembina Pipeline Corp

ONEOK Inc

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in ONEOK Inc are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, ONEOK may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pembina Pipeline Corp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with ONEOK and Pembina Pipeline

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

The idea behind ONEOK Inc and Pembina Pipeline Corp 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.