Correlation Between KINDER and Magna International

Can any of the company-specific risk be diversified away by investing in both KINDER and Magna International 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 Magna International into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between KINDER MORGAN INC and Magna International, you can compare the effects of market volatilities on KINDER and Magna International 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 Magna International. Check out your portfolio center. Please also check ongoing floating volatility patterns of KINDER and Magna International.

Diversification Opportunities for KINDER and Magna International

0.05

Correlation Coefficient

KINDER  Magna International

Significant diversification

The 3 months correlation between KINDER and Magna is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and Magna International in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Magna International 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 INC are associated (or correlated) with Magna International. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Magna International has no effect on the direction of KINDER i.e., KINDER and Magna International go up and down completely randomly.

Pair Corralation between KINDER and Magna International

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to generate 0.19 times more return on investment than Magna International. However, KINDER MORGAN INC is 5.21 times less risky than Magna International. It trades about -0.21 of its potential returns per unit of risk. Magna International is currently generating about -0.16 per unit of risk. If you would invest  9,966  in KINDER MORGAN INC on September 23, 2024 and sell it today you would lose (158.00) from holding KINDER MORGAN INC or give up 1.59% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

KINDER MORGAN INC  vs.  Magna International

KINDER MORGAN INC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days KINDER MORGAN INC 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 current stock price disturbance, may contribute to short-term losses for the investors.

Magna International

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Magna International are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, Magna International is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with KINDER and Magna International

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

The idea behind KINDER MORGAN INC and Magna International 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.