Correlation Between NuStar Energy and NGL Energy

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

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

Diversification Opportunities for NuStar Energy and NGL Energy

-0.19

Correlation Coefficient

NuStar Energy  NGL Energy

Good diversification

The 3 months correlation between NuStar and NGL is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding NuStar Energy LP and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners and NuStar 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 NuStar Energy LP are associated (or correlated) with NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of NuStar Energy i.e., NuStar Energy and NGL Energy go up and down completely randomly.

Pair Corralation between NuStar Energy and NGL Energy

Assuming the 90 days horizon NuStar Energy LP is expected to under-perform the NGL Energy. But the preferred stock apears to be less risky and, when comparing its historical volatility, NuStar Energy LP is 1.71 times less risky than NGL Energy. The preferred stock trades about -0.06 of its potential returns per unit of risk. The NGL Energy Partners is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,337  in NGL Energy Partners on March 4, 2024 and sell it today you would earn a total of  113.00  from holding NGL Energy Partners or generate 4.84% return on investment over 90 days.

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

NuStar Energy LP  vs.  NGL Energy Partners

NuStar Energy LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NuStar Energy LP has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, NuStar Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

NGL Energy Partners

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong essential indicators, NGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with NuStar Energy and NGL Energy

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

The idea behind NuStar Energy LP and NGL Energy 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.