Correlation Between Antero Midstream and DCP Midstream

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

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

Diversification Opportunities for Antero Midstream and DCP Midstream

0.25

Correlation Coefficient

Antero Midstream  DCP Midstream

Modest diversification

The 3 months correlation between Antero and DCP is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Antero Midstream Partners and DCP Midstream LP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DCP Midstream LP and Antero 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 Antero Midstream Partners are associated (or correlated) with DCP Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DCP Midstream LP has no effect on the direction of Antero Midstream i.e., Antero Midstream and DCP Midstream go up and down completely randomly.

Pair Corralation between Antero Midstream and DCP Midstream

Allowing for the 90-day total investment horizon Antero Midstream Partners is expected to generate 2.07 times more return on investment than DCP Midstream. However, Antero Midstream is 2.07 times more volatile than DCP Midstream LP. It trades about 0.08 of its potential returns per unit of risk. DCP Midstream LP is currently generating about 0.14 per unit of risk. If you would invest  914.00  in Antero Midstream Partners on September 22, 2024 and sell it today you would earn a total of  539.00  from holding Antero Midstream Partners or generate 58.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	23.39%
Values	Daily Returns

Antero Midstream Partners  vs.  DCP Midstream LP

Antero Midstream Partners

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Antero Midstream Partners has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy primary indicators, Antero Midstream is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

DCP Midstream LP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DCP Midstream LP has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental indicators, DCP Midstream is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Antero Midstream and DCP Midstream

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

The idea behind Antero Midstream Partners and DCP Midstream LP 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..