Correlation Between KINDER and Stagwell

Can any of the company-specific risk be diversified away by investing in both KINDER and Stagwell 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 Stagwell 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 Stagwell, you can compare the effects of market volatilities on KINDER and Stagwell 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 Stagwell. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINDER and Stagwell.

Diversification Opportunities for KINDER and Stagwell

-0.09

Correlation Coefficient

KINDER  Stagwell

Good diversification

The 3 months correlation between KINDER and Stagwell is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Stagwell in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Stagwell 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 Stagwell. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Stagwell has no effect on the direction of KINDER i.e., KINDER and Stagwell go up and down completely randomly.

Pair Corralation between KINDER and Stagwell

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.76 times more return on investment than Stagwell. However, KINDER MORGAN ENERGY is 1.32 times less risky than Stagwell. It trades about 0.01 of its potential returns per unit of risk. Stagwell is currently generating about -0.04 per unit of risk. If you would invest  10,108  in KINDER MORGAN ENERGY on December 25, 2024 and sell it today you would lose (4.00) from holding KINDER MORGAN ENERGY or give up 0.04% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	96.72%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Stagwell

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.

Stagwell

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stagwell has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable technical and fundamental indicators, Stagwell is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with KINDER and Stagwell

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

The idea behind KINDER MORGAN ENERGY and Stagwell 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.