Correlation Between First Ship and KINDER

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

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

Diversification Opportunities for First Ship and KINDER

0.0

Correlation Coefficient

First Ship  KINDER

Pay attention - limited upside

The 3 months correlation between First and KINDER is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Ship Lease 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 First Ship 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 First Ship Lease 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 First Ship i.e., First Ship and KINDER go up and down completely randomly.

Pair Corralation between First Ship and KINDER

Assuming the 90 days horizon First Ship is expected to generate 49.2 times less return on investment than KINDER. But when comparing it to its historical volatility, First Ship Lease is 30.31 times less risky than KINDER. It trades about 0.04 of its potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11,477  in KINDER MORGAN ENERGY on October 24, 2024 and sell it today you would lose (618.00) from holding KINDER MORGAN ENERGY or give up 5.38% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	91.33%
Values	Daily Returns

First Ship Lease  vs.  KINDER MORGAN ENERGY

First Ship Lease

Risk-Adjusted Performance

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Very Weak

Over the last 90 days First Ship Lease has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, First Ship is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

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 somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Ship and KINDER

The main advantage of trading using opposite First Ship and KINDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ship 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 First Ship Lease 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.

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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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.