Correlation Between NuStar Energy and Owens Corning
Can any of the company-specific risk be diversified away by investing in both NuStar Energy and Owens Corning 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 Owens Corning 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 Owens Corning, you can compare the effects of market volatilities on NuStar Energy and Owens Corning 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 Owens Corning. Check out your portfolio center. Please also check ongoing floating volatility patterns of NuStar Energy and Owens Corning.
Diversification Opportunities for NuStar Energy and Owens Corning
0.13 | Correlation Coefficient |
Average diversification
The 3 months correlation between NuStar and Owens is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding NuStar Energy LP and Owens Corning in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Owens Corning 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 Owens Corning. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Owens Corning has no effect on the direction of NuStar Energy i.e., NuStar Energy and Owens Corning go up and down completely randomly.
Pair Corralation between NuStar Energy and Owens Corning
Allowing for the 90-day total investment horizon NuStar Energy LP is expected to under-perform the Owens Corning. In addition to that, NuStar Energy is 1.29 times more volatile than Owens Corning. It trades about -0.23 of its total potential returns per unit of risk. Owens Corning is currently generating about 0.0 per unit of volatility. If you would invest 16,065 in Owens Corning on January 20, 2024 and sell it today you would lose (13.00) from holding Owens Corning or give up 0.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
NuStar Energy LP vs. Owens Corning
Performance |
Timeline |
NuStar Energy LP |
Owens Corning |
NuStar Energy and Owens Corning Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NuStar Energy and Owens Corning
The main advantage of trading using opposite NuStar Energy and Owens Corning positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NuStar Energy position performs unexpectedly, Owens Corning 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 Owens Corning will offset losses from the drop in Owens Corning's long position.NuStar Energy vs. MPLX LP | NuStar Energy vs. Western Midstream Partners | NuStar Energy vs. Plains All American | NuStar Energy vs. Genesis Energy LP |
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Check out your portfolio center.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.
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