Correlation Between Holly Energy and Energy Transfer

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

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

Diversification Opportunities for Holly Energy and Energy Transfer

-0.57

Correlation Coefficient

Holly Energy  Energy Transfer

Excellent diversification

The 3 months correlation between Holly and Energy is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Holly Energy Partners 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 Holly 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 Holly Energy Partners 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 Holly Energy i.e., Holly Energy and Energy Transfer go up and down completely randomly.

Pair Corralation between Holly Energy and Energy Transfer

If you would invest  2,045  in Holly Energy Partners on February 26, 2024 and sell it today you would earn a total of  0.00  from holding Holly Energy Partners or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	4.55%
Values	Daily Returns

Holly Energy Partners  vs.  Energy Transfer LP

Holly Energy Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Holly Energy Partners has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable technical and fundamental indicators, Holly Energy is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Energy Transfer LP

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Energy Transfer LP are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Energy Transfer may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Holly Energy and Energy Transfer

The main advantage of trading using opposite Holly Energy and Energy Transfer positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Holly Energy 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 Holly Energy Partners 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.