Correlation Between KINDER and Tigo Energy

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

Diversification Opportunities for KINDER and Tigo Energy

0.5

Correlation Coefficient

KINDER  Tigo Energy

Very weak diversification

The 3 months correlation between KINDER and Tigo is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Tigo Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tigo Energy 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 Tigo Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tigo Energy has no effect on the direction of KINDER i.e., KINDER and Tigo Energy go up and down completely randomly.

Pair Corralation between KINDER and Tigo Energy

Assuming the 90 days trading horizon KINDER is expected to generate 10.54 times less return on investment than Tigo Energy. But when comparing it to its historical volatility, KINDER MORGAN ENERGY is 9.44 times less risky than Tigo Energy. It trades about 0.03 of its potential returns per unit of risk. Tigo Energy is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  93.00  in Tigo Energy on September 23, 2024 and sell it today you would earn a total of  1.00  from holding Tigo Energy or generate 1.08% return on investment over 90 days.

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

KINDER MORGAN ENERGY  vs.  Tigo Energy

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.

Tigo Energy

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with KINDER and Tigo Energy

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

The idea behind KINDER MORGAN ENERGY and Tigo 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.

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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.