Correlation Between Safe Bulkers and NGL Energy

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

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

Diversification Opportunities for Safe Bulkers and NGL Energy

-0.19

Correlation Coefficient

Safe Bulkers  NGL Energy

Good diversification

The 3 months correlation between Safe and NGL is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Safe Bulkers and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners and Safe Bulkers 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 Safe Bulkers are associated (or correlated) with NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Safe Bulkers i.e., Safe Bulkers and NGL Energy go up and down completely randomly.

Pair Corralation between Safe Bulkers and NGL Energy

Allowing for the 90-day total investment horizon Safe Bulkers is expected to generate 4.42 times less return on investment than NGL Energy. But when comparing it to its historical volatility, Safe Bulkers is 1.56 times less risky than NGL Energy. It trades about 0.03 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  140.00  in NGL Energy Partners on October 2, 2024 and sell it today you would earn a total of  359.00  from holding NGL Energy Partners or generate 256.43% return on investment over 90 days.

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

Safe Bulkers  vs.  NGL Energy Partners

Safe Bulkers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Safe Bulkers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain somewhat strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

NGL Energy Partners

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, NGL Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Safe Bulkers and NGL Energy

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

The idea behind Safe Bulkers and NGL Energy 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.