Correlation Between Plains GP and Energy Transfer
Can any of the company-specific risk be diversified away by investing in both Plains GP and Energy Transfer 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 Plains GP and Energy Transfer into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plains GP Holdings and Energy Transfer LP, you can compare the effects of market volatilities on Plains GP and Energy Transfer 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 Plains GP with a short position of Energy Transfer. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains GP and Energy Transfer.
Diversification Opportunities for Plains GP and Energy Transfer
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Plains and Energy is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Plains GP Holdings and Energy Transfer LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Energy Transfer LP and Plains GP 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 Plains GP Holdings are associated (or correlated) with Energy Transfer. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Energy Transfer LP has no effect on the direction of Plains GP i.e., Plains GP and Energy Transfer go up and down completely randomly.
Pair Corralation between Plains GP and Energy Transfer
Given the investment horizon of 90 days Plains GP Holdings is expected to generate 0.95 times more return on investment than Energy Transfer. However, Plains GP Holdings is 1.05 times less risky than Energy Transfer. It trades about 0.13 of its potential returns per unit of risk. Energy Transfer LP is currently generating about 0.02 per unit of risk. If you would invest 1,926 in Plains GP Holdings on December 2, 2024 and sell it today you would earn a total of 234.00 from holding Plains GP Holdings or generate 12.15% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Plains GP Holdings vs. Energy Transfer LP
Performance |
Timeline |
Plains GP Holdings |
Energy Transfer LP |
Plains GP and Energy Transfer Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Plains GP and Energy Transfer
The main advantage of trading using opposite Plains GP and Energy Transfer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains GP position performs unexpectedly, Energy Transfer 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 Energy Transfer will offset losses from the drop in Energy Transfer's long position.Plains GP vs. Targa Resources | Plains GP vs. Western Midstream Partners | Plains GP vs. MPLX LP | Plains GP vs. Plains All American |
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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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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