Correlation Between NGL Energy and IShares Core

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

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

Diversification Opportunities for NGL Energy and IShares Core

-0.23

Correlation Coefficient

NGL Energy  IShares Core

Very good diversification

The 3 months correlation between NGL and IShares is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and iShares Core SP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on iShares Core SP and NGL 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 NGL Energy Partners are associated (or correlated) with IShares Core. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of iShares Core SP has no effect on the direction of NGL Energy i.e., NGL Energy and IShares Core go up and down completely randomly.

Pair Corralation between NGL Energy and IShares Core

Considering the 90-day investment horizon NGL Energy Partners is expected to generate 2.09 times more return on investment than IShares Core. However, NGL Energy is 2.09 times more volatile than iShares Core SP. It trades about 0.11 of its potential returns per unit of risk. iShares Core SP is currently generating about 0.09 per unit of risk. If you would invest  346.00  in NGL Energy Partners on February 28, 2024 and sell it today you would earn a total of  228.00  from holding NGL Energy Partners or generate 65.9% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	99.6%
Values	Daily Returns

NGL Energy Partners  vs.  iShares Core SP

NGL Energy Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NGL Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, NGL Energy is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

iShares Core SP

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in iShares Core SP are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking indicators, IShares Core is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with NGL Energy and IShares Core

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

The idea behind NGL Energy Partners and iShares Core SP 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.