Correlation Between KINDER and Coda Octopus

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

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

Diversification Opportunities for KINDER and Coda Octopus

0.13

Correlation Coefficient

KINDER  Coda Octopus

Average diversification

The 3 months correlation between KINDER and Coda is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Coda Octopus Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coda Octopus Group and KINDER 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 KINDER MORGAN ENERGY are associated (or correlated) with Coda Octopus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coda Octopus Group has no effect on the direction of KINDER i.e., KINDER and Coda Octopus go up and down completely randomly.

Pair Corralation between KINDER and Coda Octopus

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.14 times more return on investment than Coda Octopus. However, KINDER MORGAN ENERGY is 6.94 times less risky than Coda Octopus. It trades about -0.5 of its potential returns per unit of risk. Coda Octopus Group is currently generating about -0.2 per unit of risk. If you would invest  11,441  in KINDER MORGAN ENERGY on October 8, 2024 and sell it today you would lose (340.00) from holding KINDER MORGAN ENERGY or give up 2.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	89.47%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Coda Octopus Group

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 somewhat strong basic indicators, KINDER is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Coda Octopus Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Coda Octopus Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, Coda Octopus is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KINDER and Coda Octopus

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

The idea behind KINDER MORGAN ENERGY and Coda Octopus Group 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.