Correlation Between United States and Energy Transfer

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

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

Diversification Opportunities for United States and Energy Transfer

0.58

Correlation Coefficient

United States  Energy Transfer

Very weak diversification

The 3 months correlation between United and Energy is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding United States Steel 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 United States 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 United States Steel 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 United States i.e., United States and Energy Transfer go up and down completely randomly.

Pair Corralation between United States and Energy Transfer

Taking into account the 90-day investment horizon United States is expected to generate 1.1 times less return on investment than Energy Transfer. In addition to that, United States is 3.91 times more volatile than Energy Transfer LP. It trades about 0.02 of its total potential returns per unit of risk. Energy Transfer LP is currently generating about 0.1 per unit of volatility. If you would invest  1,144  in Energy Transfer LP on September 12, 2024 and sell it today you would earn a total of  53.00  from holding Energy Transfer LP or generate 4.63% return on investment over 90 days.

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

United States Steel  vs.  Energy Transfer LP

United States Steel

Risk-Adjusted Performance

1 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in United States Steel are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, United States is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Energy Transfer LP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Energy Transfer is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with United States and Energy Transfer

The main advantage of trading using opposite United States and Energy Transfer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if United States 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.

The idea behind United States Steel and Energy Transfer 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.