Correlation Between Dynagas LNG and Kinetik Holdings

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

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

Diversification Opportunities for Dynagas LNG and Kinetik Holdings

0.87

Correlation Coefficient

Dynagas LNG  Kinetik Holdings

Very poor diversification

The 3 months correlation between Dynagas and Kinetik is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Dynagas LNG Partners and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings and Dynagas LNG 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 Dynagas LNG Partners are associated (or correlated) with Kinetik Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetik Holdings has no effect on the direction of Dynagas LNG i.e., Dynagas LNG and Kinetik Holdings go up and down completely randomly.

Pair Corralation between Dynagas LNG and Kinetik Holdings

Assuming the 90 days trading horizon Dynagas LNG is expected to generate 14.34 times less return on investment than Kinetik Holdings. But when comparing it to its historical volatility, Dynagas LNG Partners is 4.45 times less risky than Kinetik Holdings. It trades about 0.06 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  4,285  in Kinetik Holdings on September 12, 2024 and sell it today you would earn a total of  1,260  from holding Kinetik Holdings or generate 29.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Dynagas LNG Partners  vs.  Kinetik Holdings

Dynagas LNG Partners

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Dynagas LNG Partners are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Dynagas LNG is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetik Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dynagas LNG and Kinetik Holdings

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

The idea behind Dynagas LNG Partners and Kinetik Holdings 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.