Correlation Between KINDER and Vulcan Materials

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

Diversification Opportunities for KINDER and Vulcan Materials

-0.14

Correlation Coefficient

KINDER  Vulcan Materials

Good diversification

The 3 months correlation between KINDER and Vulcan is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Vulcan Materials in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vulcan Materials 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 Vulcan Materials. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vulcan Materials has no effect on the direction of KINDER i.e., KINDER and Vulcan Materials go up and down completely randomly.

Pair Corralation between KINDER and Vulcan Materials

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to under-perform the Vulcan Materials. But the bond apears to be less risky and, when comparing its historical volatility, KINDER MORGAN ENERGY is 1.71 times less risky than Vulcan Materials. The bond trades about -0.04 of its potential returns per unit of risk. The Vulcan Materials is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  23,778  in Vulcan Materials on October 8, 2024 and sell it today you would earn a total of  1,935  from holding Vulcan Materials or generate 8.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	90.32%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Vulcan Materials

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.

Vulcan Materials

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Vulcan Materials are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Vulcan Materials may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KINDER and Vulcan Materials

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

The idea behind KINDER MORGAN ENERGY and Vulcan Materials 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.