Correlation Between KINDER and Wabash National

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

Diversification Opportunities for KINDER and Wabash National

-0.09

Correlation Coefficient

KINDER  Wabash National

Good diversification

The 3 months correlation between KINDER and Wabash is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN ENERGY and Wabash National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wabash National 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 Wabash National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wabash National has no effect on the direction of KINDER i.e., KINDER and Wabash National go up and down completely randomly.

Pair Corralation between KINDER and Wabash National

Assuming the 90 days trading horizon KINDER MORGAN ENERGY is expected to generate 0.33 times more return on investment than Wabash National. However, KINDER MORGAN ENERGY is 3.02 times less risky than Wabash National. It trades about 0.12 of its potential returns per unit of risk. Wabash National is currently generating about -0.2 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 Against
Strength	Insignificant
Accuracy	98.33%
Values	Daily Returns

KINDER MORGAN ENERGY  vs.  Wabash National

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.

Wabash National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Wabash National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in April 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with KINDER and Wabash National

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

The idea behind KINDER MORGAN ENERGY and Wabash National 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.