Correlation Between NuStar Energy and Dorian LPG

Can any of the company-specific risk be diversified away by investing in both NuStar Energy and Dorian LPG 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 Dorian LPG 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 Dorian LPG, you can compare the effects of market volatilities on NuStar Energy and Dorian LPG 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 Dorian LPG. Check out your portfolio center. Please also check ongoing floating volatility patterns of NuStar Energy and Dorian LPG.

Diversification Opportunities for NuStar Energy and Dorian LPG

-0.34

Correlation Coefficient

NuStar Energy  Dorian LPG

Very good diversification

The 3 months correlation between NuStar and Dorian is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding NuStar Energy LP and Dorian LPG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dorian LPG 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 Dorian LPG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dorian LPG has no effect on the direction of NuStar Energy i.e., NuStar Energy and Dorian LPG go up and down completely randomly.

Pair Corralation between NuStar Energy and Dorian LPG

Allowing for the 90-day total investment horizon NuStar Energy LP is expected to under-perform the Dorian LPG. But the stock apears to be less risky and, when comparing its historical volatility, NuStar Energy LP is 1.17 times less risky than Dorian LPG. The stock trades about -0.11 of its potential returns per unit of risk. The Dorian LPG is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  4,083  in Dorian LPG on February 2, 2024 and sell it today you would earn a total of  181.00  from holding Dorian LPG or generate 4.43% 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.  Dorian LPG

NuStar Energy LP

Risk-Adjusted Performance

1 of 100

Weak

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

Dorian LPG

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dorian LPG are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Dorian LPG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with NuStar Energy and Dorian LPG

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

The idea behind NuStar Energy LP and Dorian LPG 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.

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 Commodity Directory module to find actively traded commodities issued by global exchanges.