Correlation Between FMC and KINDER

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

By analyzing existing cross correlation between FMC Corporation and KINDER MORGAN ENERGY, you can compare the effects of market volatilities on FMC and KINDER 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 FMC with a short position of KINDER. Check out your portfolio center. Please also check ongoing floating volatility patterns of FMC and KINDER.

Diversification Opportunities for FMC and KINDER

0.68

Correlation Coefficient

FMC  KINDER

Poor diversification

The 3 months correlation between FMC and KINDER is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding FMC Corp. and KINDER MORGAN ENERGY in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on KINDER MORGAN ENERGY and FMC 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 FMC Corporation are associated (or correlated) with KINDER. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of KINDER MORGAN ENERGY has no effect on the direction of FMC i.e., FMC and KINDER go up and down completely randomly.

Pair Corralation between FMC and KINDER

Considering the 90-day investment horizon FMC Corporation is expected to under-perform the KINDER. In addition to that, FMC is 1.75 times more volatile than KINDER MORGAN ENERGY. It trades about -0.16 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.16 per unit of volatility. If you would invest  10,604  in KINDER MORGAN ENERGY on October 5, 2024 and sell it today you would lose (1,185) from holding KINDER MORGAN ENERGY or give up 11.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	82.26%
Values	Daily Returns

FMC Corp.  vs.  KINDER MORGAN ENERGY

FMC Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FMC Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's primary indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN ENERGY has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KINDER MORGAN ENERGY investors.

Pair Trading with FMC and KINDER

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

The idea behind FMC Corporation and KINDER MORGAN ENERGY 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.