Correlation Between ReTo Eco and KINDER

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

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

Diversification Opportunities for ReTo Eco and KINDER

0.84

Correlation Coefficient

ReTo Eco  KINDER

Very poor diversification

The 3 months correlation between ReTo and KINDER is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding ReTo Eco Solutions 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 ReTo Eco 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 ReTo Eco Solutions 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 ReTo Eco i.e., ReTo Eco and KINDER go up and down completely randomly.

Pair Corralation between ReTo Eco and KINDER

Given the investment horizon of 90 days ReTo Eco Solutions is expected to under-perform the KINDER. In addition to that, ReTo Eco is 3.25 times more volatile than KINDER MORGAN ENERGY. It trades about -0.09 of its total potential returns per unit of risk. KINDER MORGAN ENERGY is currently generating about -0.12 per unit of volatility. If you would invest  9,365  in KINDER MORGAN ENERGY on October 8, 2024 and sell it today you would lose (651.00) from holding KINDER MORGAN ENERGY or give up 6.95% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	79.03%
Values	Daily Returns

ReTo Eco Solutions  vs.  KINDER MORGAN ENERGY

ReTo Eco Solutions

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ReTo Eco Solutions has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

KINDER MORGAN ENERGY

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Bond's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for KINDER MORGAN ENERGY investors.

Pair Trading with ReTo Eco and KINDER

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

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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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.