Correlation Between Equitrans Midstream and TOP Ships

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

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

Diversification Opportunities for Equitrans Midstream and TOP Ships

-0.67

Correlation Coefficient

Equitrans Midstream  TOP Ships

Excellent diversification

The 3 months correlation between Equitrans and TOP is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Equitrans Midstream Corp and TOP Ships in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOP Ships and Equitrans 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 Equitrans Midstream Corp are associated (or correlated) with TOP Ships. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOP Ships has no effect on the direction of Equitrans Midstream i.e., Equitrans Midstream and TOP Ships go up and down completely randomly.

Pair Corralation between Equitrans Midstream and TOP Ships

Given the investment horizon of 90 days Equitrans Midstream Corp is expected to generate 0.94 times more return on investment than TOP Ships. However, Equitrans Midstream Corp is 1.07 times less risky than TOP Ships. It trades about 0.31 of its potential returns per unit of risk. TOP Ships is currently generating about 0.03 per unit of risk. If you would invest  1,031  in Equitrans Midstream Corp on February 28, 2024 and sell it today you would earn a total of  365.00  from holding Equitrans Midstream Corp or generate 35.4% return on investment over 90 days.

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

Equitrans Midstream Corp  vs.  TOP Ships

Equitrans Midstream Corp

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Equitrans Midstream Corp are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady basic indicators, Equitrans Midstream displayed solid returns over the last few months and may actually be approaching a breakup point.

TOP Ships

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in TOP Ships are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, TOP Ships is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Equitrans Midstream and TOP Ships

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

The idea behind Equitrans Midstream Corp and TOP Ships 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.