Correlation Between KINDER and Empresa Distribuidora

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

Diversification Opportunities for KINDER and Empresa Distribuidora

-0.35

Correlation Coefficient

KINDER  Empresa Distribuidora

Very good diversification

The 3 months correlation between KINDER and Empresa is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Empresa Distribuidora y in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Empresa Distribuidora 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 Empresa Distribuidora. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Empresa Distribuidora has no effect on the direction of KINDER i.e., KINDER and Empresa Distribuidora go up and down completely randomly.

Pair Corralation between KINDER and Empresa Distribuidora

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.31 times more return on investment than Empresa Distribuidora. However, KINDER MORGAN ENERGY is 3.22 times less risky than Empresa Distribuidora. It trades about -0.44 of its potential returns per unit of risk. Empresa Distribuidora y is currently generating about -0.18 per unit of risk. If you would invest  10,634  in KINDER MORGAN ENERGY on October 11, 2024 and sell it today you would lose (1,117) from holding KINDER MORGAN ENERGY or give up 10.5% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	80.95%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Empresa Distribuidora y

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 unfluctuating performance in the last few months, the Bond's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for KINDER MORGAN ENERGY investors.

Empresa Distribuidora

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with KINDER and Empresa Distribuidora

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

The idea behind KINDER MORGAN ENERGY and Empresa Distribuidora y 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.