Correlation Between Enterprise Products and DHT Holdings

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

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

Diversification Opportunities for Enterprise Products and DHT Holdings

0.89

Correlation Coefficient

Enterprise Products  DHT Holdings

Very poor diversification

The 12 months correlation between Enterprise and DHT is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Enterprise Products Partners and DHT Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DHT Holdings and Enterprise Products 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 Enterprise Products Partners are associated (or correlated) with DHT Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DHT Holdings has no effect on the direction of Enterprise Products i.e., Enterprise Products and DHT Holdings go up and down completely randomly.

Pair Corralation between Enterprise Products and DHT Holdings

Considering the 90-day investment horizon Enterprise Products Partners is expected to generate 0.33 times more return on investment than DHT Holdings. However, Enterprise Products Partners is 3.04 times less risky than DHT Holdings. It trades about -0.13 of its potential returns per unit of risk. DHT Holdings is currently generating about -0.15 per unit of risk. If you would invest  2,884  in Enterprise Products Partners on March 16, 2024 and sell it today you would lose (46.00) from holding Enterprise Products Partners or give up 1.6% of portfolio value over 90 days.

Time Period	12 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Enterprise Products Partners  vs.  DHT Holdings

Enterprise Products

Risk-Adjusted Performance

8 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Enterprise Products Partners are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Enterprise Products is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

DHT Holdings

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in DHT Holdings are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile technical indicators, DHT Holdings may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with Enterprise Products and DHT Holdings

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

The idea behind Enterprise Products Partners and DHT Holdings 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 Commodity Directory module to find actively traded commodities issued by global exchanges.