Correlation Between Montauk Renewables and KINDER

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

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

Diversification Opportunities for Montauk Renewables and KINDER

-0.05

Correlation Coefficient

Montauk Renewables  KINDER

Good diversification

The 3 months correlation between Montauk and KINDER is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables 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 Montauk Renewables i.e., Montauk Renewables and KINDER go up and down completely randomly.

Pair Corralation between Montauk Renewables and KINDER

Given the investment horizon of 90 days Montauk Renewables is expected to under-perform the KINDER. In addition to that, Montauk Renewables is 5.44 times more volatile than KINDER MORGAN ENERGY. It trades about -0.06 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.01 per unit of volatility. If you would invest  8,851  in KINDER MORGAN ENERGY on October 7, 2024 and sell it today you would lose (49.00) from holding KINDER MORGAN ENERGY or give up 0.55% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	75.61%
Values	Daily Returns

Montauk Renewables  vs.  KINDER MORGAN ENERGY

Montauk Renewables

Risk-Adjusted Performance

0 of 100

Very Weak

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

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 recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Montauk Renewables and KINDER

The main advantage of trading using opposite Montauk Renewables and KINDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Montauk Renewables 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 Montauk Renewables 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.