Correlation Between Antero Midstream and Dynagas LNG

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

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

Diversification Opportunities for Antero Midstream and Dynagas LNG

0.06

Correlation Coefficient

Antero Midstream  Dynagas LNG

Significant diversification

The 3 months correlation between Antero and Dynagas is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and Dynagas LNG Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dynagas LNG Partners and Antero Midstream 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 Antero Midstream Partners are associated (or correlated) with Dynagas LNG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dynagas LNG Partners has no effect on the direction of Antero Midstream i.e., Antero Midstream and Dynagas LNG go up and down completely randomly.

Pair Corralation between Antero Midstream and Dynagas LNG

Allowing for the 90-day total investment horizon Antero Midstream is expected to generate 21.1 times less return on investment than Dynagas LNG. But when comparing it to its historical volatility, Antero Midstream Partners is 2.62 times less risky than Dynagas LNG. It trades about 0.05 of its potential returns per unit of risk. Dynagas LNG Partners is currently generating about 0.42 of returns per unit of risk over similar time horizon. If you would invest  256.00  in Dynagas LNG Partners on January 20, 2024 and sell it today you would earn a total of  60.00  from holding Dynagas LNG Partners or generate 23.44% return on investment over 90 days.

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

Antero Midstream Partners  vs.  Dynagas LNG Partners

Antero Midstream Partners

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Antero Midstream Partners are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady primary indicators, Antero Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

Dynagas LNG Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Dynagas LNG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Antero Midstream and Dynagas LNG

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

The idea behind Antero Midstream Partners and Dynagas LNG 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.

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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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.