Correlation Between Kinetik Holdings and NGL Energy

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

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

Diversification Opportunities for Kinetik Holdings and NGL Energy

0.11

Correlation Coefficient

Kinetik Holdings  NGL Energy

Average diversification

The 3 months correlation between Kinetik and NGL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding Kinetik Holdings and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners 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 NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Kinetik Holdings i.e., Kinetik Holdings and NGL Energy go up and down completely randomly.

Pair Corralation between Kinetik Holdings and NGL Energy

Given the investment horizon of 90 days Kinetik Holdings is expected to generate 0.68 times more return on investment than NGL Energy. However, Kinetik Holdings is 1.47 times less risky than NGL Energy. It trades about 0.27 of its potential returns per unit of risk. NGL Energy Partners is currently generating about 0.12 per unit of risk. If you would invest  4,273  in Kinetik Holdings on September 2, 2024 and sell it today you would earn a total of  1,629  from holding Kinetik Holdings or generate 38.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Kinetik Holdings  vs.  NGL Energy Partners

Kinetik Holdings

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 21 (%) 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.

NGL Energy Partners

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady technical and fundamental indicators, NGL Energy disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kinetik Holdings and NGL Energy

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

The idea behind Kinetik Holdings and NGL Energy Partners 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.