Correlation Between Plains All and Kodiak Sciences

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

By analyzing existing cross correlation between Plains All American and Kodiak Sciences, you can compare the effects of market volatilities on Plains All and Kodiak Sciences 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 Plains All with a short position of Kodiak Sciences. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains All and Kodiak Sciences.

Diversification Opportunities for Plains All and Kodiak Sciences

-0.72

Correlation Coefficient

Plains All  Kodiak Sciences

Pay attention - limited upside

The 3 months correlation between Plains and Kodiak is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Plains All American and Kodiak Sciences in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kodiak Sciences and Plains All 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 Plains All American are associated (or correlated) with Kodiak Sciences. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kodiak Sciences has no effect on the direction of Plains All i.e., Plains All and Kodiak Sciences go up and down completely randomly.

Pair Corralation between Plains All and Kodiak Sciences

Considering the 90-day investment horizon Plains All American is expected to generate 0.29 times more return on investment than Kodiak Sciences. However, Plains All American is 3.44 times less risky than Kodiak Sciences. It trades about 0.2 of its potential returns per unit of risk. Kodiak Sciences is currently generating about -0.31 per unit of risk. If you would invest  1,647  in Plains All American on December 27, 2024 and sell it today you would earn a total of  362.00  from holding Plains All American or generate 21.98% return on investment over 90 days.

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

Plains All American  vs.  Kodiak Sciences

Plains All American

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Plains All American are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat uncertain basic indicators, Plains All sustained solid returns over the last few months and may actually be approaching a breakup point.

Kodiak Sciences

Risk-Adjusted Performance

Very Weak

Over the last 90 days Kodiak Sciences has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Plains All and Kodiak Sciences

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

The idea behind Plains All American and Kodiak Sciences 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .