Correlation Between NGL Energy and Kinder Morgan
Can any of the company-specific risk be diversified away by investing in both NGL Energy 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 NGL Energy and Kinder Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NGL Energy Partners and Kinder Morgan, you can compare the effects of market volatilities on NGL Energy 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 NGL Energy with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of NGL Energy and Kinder Morgan.
Diversification Opportunities for NGL Energy and Kinder Morgan
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between NGL and Kinder is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding NGL Energy Partners and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and NGL Energy 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 NGL Energy Partners 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 NGL Energy i.e., NGL Energy and Kinder Morgan go up and down completely randomly.
Pair Corralation between NGL Energy and Kinder Morgan
Assuming the 90 days trading horizon NGL Energy Partners is expected to generate 0.53 times more return on investment than Kinder Morgan. However, NGL Energy Partners is 1.88 times less risky than Kinder Morgan. It trades about 0.24 of its potential returns per unit of risk. Kinder Morgan is currently generating about -0.06 per unit of risk. If you would invest 2,301 in NGL Energy Partners on September 26, 2024 and sell it today you would earn a total of 87.00 from holding NGL Energy Partners or generate 3.78% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
NGL Energy Partners vs. Kinder Morgan
Performance |
Timeline |
NGL Energy Partners |
Kinder Morgan |
NGL Energy and Kinder Morgan Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with NGL Energy and Kinder Morgan
The main advantage of trading using opposite NGL Energy and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NGL Energy 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.NGL Energy vs. GasLog Partners LP | NGL Energy vs. Global Partners LP | NGL Energy vs. Martin Midstream Partners | NGL Energy vs. GasLog Partners LP |
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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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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