Correlation Between Cheniere Energy and NuStar Energy
Can any of the company-specific risk be diversified away by investing in both Cheniere Energy and NuStar 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 Cheniere Energy and NuStar Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cheniere Energy and NuStar Energy LP, you can compare the effects of market volatilities on Cheniere Energy and NuStar 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 Cheniere Energy with a short position of NuStar Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and NuStar Energy.
Diversification Opportunities for Cheniere Energy and NuStar Energy
-0.38 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Cheniere and NuStar is -0.38. Overlapping area represents the amount of risk that can be diversified away by holding Cheniere Energy and NuStar Energy LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NuStar Energy LP and Cheniere 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 Cheniere Energy are associated (or correlated) with NuStar Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NuStar Energy LP has no effect on the direction of Cheniere Energy i.e., Cheniere Energy and NuStar Energy go up and down completely randomly.
Pair Corralation between Cheniere Energy and NuStar Energy
Considering the 90-day investment horizon Cheniere Energy is expected to generate 0.55 times more return on investment than NuStar Energy. However, Cheniere Energy is 1.8 times less risky than NuStar Energy. It trades about -0.06 of its potential returns per unit of risk. NuStar Energy LP is currently generating about -0.07 per unit of risk. If you would invest 15,974 in Cheniere Energy on January 26, 2024 and sell it today you would lose (232.00) from holding Cheniere Energy or give up 1.45% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cheniere Energy vs. NuStar Energy LP
Performance |
| Timeline |
| Cheniere Energy |
| NuStar Energy LP |
Cheniere Energy and NuStar Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cheniere Energy and NuStar Energy
The main advantage of trading using opposite Cheniere Energy and NuStar Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere Energy position performs unexpectedly, NuStar 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 NuStar Energy will offset losses from the drop in NuStar Energy's long position.The idea behind Cheniere Energy and NuStar Energy 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.| NuStar Energy vs. ONEOK Inc | NuStar Energy vs. Enterprise Products Partners | NuStar Energy vs. Energy Transfer LP | NuStar Energy vs. Kinder Morgan |
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 AI Investment Finder module to use AI to screen and filter profitable investment opportunities.
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