Correlation Between Obayashi and KINDER

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

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

Diversification Opportunities for Obayashi and KINDER

0.05

Correlation Coefficient

Obayashi  KINDER

Significant diversification

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

Pair Corralation between Obayashi and KINDER

Assuming the 90 days horizon Obayashi is expected to under-perform the KINDER. In addition to that, Obayashi is 60.66 times more volatile than KINDER MORGAN ENERGY. It trades about -0.17 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  10,899  in KINDER MORGAN ENERGY on December 30, 2024 and sell it today you would lose (50.00) from holding KINDER MORGAN ENERGY or give up 0.46% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.92%
Values	Daily Returns

Obayashi  vs.  KINDER MORGAN ENERGY

Obayashi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Obayashi has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

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

Pair Trading with Obayashi and KINDER

The main advantage of trading using opposite Obayashi and KINDER positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Obayashi 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 Obayashi 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.