Correlation Between Kinetik Holdings and Melar Acquisition

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

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

Diversification Opportunities for Kinetik Holdings and Melar Acquisition

0.21

Correlation Coefficient

Kinetik Holdings  Melar Acquisition

Modest diversification

The 3 months correlation between Kinetik and Melar is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Kinetik Holdings and Melar Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Melar Acquisition Corp and Kinetik Holdings 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 Kinetik Holdings are associated (or correlated) with Melar Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Melar Acquisition Corp has no effect on the direction of Kinetik Holdings i.e., Kinetik Holdings and Melar Acquisition go up and down completely randomly.

Pair Corralation between Kinetik Holdings and Melar Acquisition

Given the investment horizon of 90 days Kinetik Holdings is expected to under-perform the Melar Acquisition. But the stock apears to be less risky and, when comparing its historical volatility, Kinetik Holdings is 5.66 times less risky than Melar Acquisition. The stock trades about -0.03 of its potential returns per unit of risk. The Melar Acquisition Corp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  11.00  in Melar Acquisition Corp on December 21, 2024 and sell it today you would earn a total of  3.29  from holding Melar Acquisition Corp or generate 29.91% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	72.88%
Values	Daily Returns

Kinetik Holdings  vs.  Melar Acquisition Corp

Kinetik Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinetik Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Kinetik Holdings is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Melar Acquisition Corp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Melar Acquisition Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile forward indicators, Melar Acquisition showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinetik Holdings and Melar Acquisition

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

The idea behind Kinetik Holdings and Melar Acquisition Corp 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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.