Correlation Between Computershare and Kinder Morgan

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

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

Diversification Opportunities for Computershare and Kinder Morgan

0.61

Correlation Coefficient

Computershare  Kinder Morgan

Poor diversification

The 3 months correlation between Computershare and Kinder is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Computershare Limited and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Computershare 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 Computershare Limited 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 Computershare i.e., Computershare and Kinder Morgan go up and down completely randomly.

Pair Corralation between Computershare and Kinder Morgan

Assuming the 90 days horizon Computershare is expected to generate 1.37 times less return on investment than Kinder Morgan. But when comparing it to its historical volatility, Computershare Limited is 1.07 times less risky than Kinder Morgan. It trades about 0.11 of its potential returns per unit of risk. Kinder Morgan is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  2,565  in Kinder Morgan on October 10, 2024 and sell it today you would earn a total of  113.00  from holding Kinder Morgan or generate 4.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	94.44%
Values	Daily Returns

Computershare Limited  vs.  Kinder Morgan

Computershare Limited

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Computershare Limited are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, Computershare reported solid returns over the last few months and may actually be approaching a breakup point.

Kinder Morgan

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinder Morgan are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, Kinder Morgan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Computershare and Kinder Morgan

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

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.