Correlation Between KINDER and PACCAR

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

Diversification Opportunities for KINDER and PACCAR

0.02

Correlation Coefficient

KINDER  PACCAR

Significant diversification

The 3 months correlation between KINDER and PACCAR is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and PACCAR Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PACCAR Inc 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 PACCAR. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PACCAR Inc has no effect on the direction of KINDER i.e., KINDER and PACCAR go up and down completely randomly.

Pair Corralation between KINDER and PACCAR

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.59 times more return on investment than PACCAR. However, KINDER MORGAN ENERGY is 1.71 times less risky than PACCAR. It trades about 0.12 of its potential returns per unit of risk. PACCAR Inc is currently generating about -0.05 per unit of risk. If you would invest  9,194  in KINDER MORGAN ENERGY on December 24, 2024 and sell it today you would earn a total of  658.00  from holding KINDER MORGAN ENERGY or generate 7.16% return on investment over 90 days.

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

KINDER MORGAN ENERGY  vs.  PACCAR Inc

KINDER MORGAN ENERGY

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN ENERGY are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, KINDER may actually be approaching a critical reversion point that can send shares even higher in April 2025.

PACCAR Inc

Risk-Adjusted Performance

Very Weak

Over the last 90 days PACCAR Inc has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, PACCAR is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with KINDER and PACCAR

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

The idea behind KINDER MORGAN ENERGY and PACCAR Inc 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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.