Correlation Between MPLX LP and Kinder Morgan

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

By analyzing existing cross correlation between MPLX LP and Kinder Morgan, you can compare the effects of market volatilities on MPLX LP and Kinder Morgan 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 MPLX LP with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of MPLX LP and Kinder Morgan.

Diversification Opportunities for MPLX LP and Kinder Morgan

0.28

Correlation Coefficient

MPLX LP  Kinder Morgan

Modest diversification

The 3 months correlation between MPLX and Kinder is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding MPLX LP and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and MPLX LP 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 MPLX LP are associated (or correlated) with Kinder Morgan. 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 has no effect on the direction of MPLX LP i.e., MPLX LP and Kinder Morgan go up and down completely randomly.

Pair Corralation between MPLX LP and Kinder Morgan

Given the investment horizon of 90 days MPLX LP is expected to generate 0.76 times more return on investment than Kinder Morgan. However, MPLX LP is 1.31 times less risky than Kinder Morgan. It trades about 0.17 of its potential returns per unit of risk. Kinder Morgan is currently generating about -0.03 per unit of risk. If you would invest  4,679  in MPLX LP on November 19, 2024 and sell it today you would earn a total of  704.00  from holding MPLX LP or generate 15.05% return on investment over 90 days.

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

MPLX LP  vs.  Kinder Morgan

MPLX LP

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MPLX LP are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady essential indicators, MPLX LP showed solid returns over the last few months and may actually be approaching a breakup point.

Kinder Morgan

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kinder Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong primary indicators, Kinder Morgan is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with MPLX LP and Kinder Morgan

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

The idea behind MPLX LP and Kinder Morgan 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.