Correlation Between KINDER and Verde Clean

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

Diversification Opportunities for KINDER and Verde Clean

0.27

Correlation Coefficient

KINDER  Verde Clean

Modest diversification

The 3 months correlation between KINDER and Verde is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Verde Clean Fuels in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Verde Clean Fuels 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 Verde Clean. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Verde Clean Fuels has no effect on the direction of KINDER i.e., KINDER and Verde Clean go up and down completely randomly.

Pair Corralation between KINDER and Verde Clean

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.29 times more return on investment than Verde Clean. However, KINDER MORGAN ENERGY is 3.39 times less risky than Verde Clean. It trades about 0.0 of its potential returns per unit of risk. Verde Clean Fuels is currently generating about -0.03 per unit of risk. If you would invest  8,853  in KINDER MORGAN ENERGY on October 20, 2024 and sell it today you would lose (40.00) from holding KINDER MORGAN ENERGY or give up 0.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	84.0%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Verde Clean Fuels

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.

Verde Clean Fuels

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Verde Clean Fuels has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Verde Clean is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with KINDER and Verde Clean

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

The idea behind KINDER MORGAN ENERGY and Verde Clean Fuels 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 Stocks Directory module to find actively traded stocks across global markets.