Correlation Between KINDER and Playtech Plc

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

Diversification Opportunities for KINDER and Playtech Plc

0.41

Correlation Coefficient

KINDER  Playtech Plc

Very weak diversification

The 3 months correlation between KINDER and Playtech is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Playtech plc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Playtech plc 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 Playtech Plc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Playtech plc has no effect on the direction of KINDER i.e., KINDER and Playtech Plc go up and down completely randomly.

Pair Corralation between KINDER and Playtech Plc

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.66 times more return on investment than Playtech Plc. However, KINDER MORGAN ENERGY is 1.52 times less risky than Playtech Plc. It trades about 0.08 of its potential returns per unit of risk. Playtech plc is currently generating about -0.04 per unit of risk. If you would invest  10,486  in KINDER MORGAN ENERGY on December 24, 2024 and sell it today you would earn a total of  346.00  from holding KINDER MORGAN ENERGY or generate 3.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	73.33%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Playtech plc

KINDER MORGAN ENERGY

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN ENERGY are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. 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.

Playtech plc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Playtech plc has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Playtech Plc is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with KINDER and Playtech Plc

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

The idea behind KINDER MORGAN ENERGY and Playtech plc 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.