Correlation Between KINDER and SFL

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

Diversification Opportunities for KINDER and SFL

0.11

Correlation Coefficient

KINDER  SFL

Average diversification

The 3 months correlation between KINDER and SFL is 0.11. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and SFL Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFL Corporation 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 SFL. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFL Corporation has no effect on the direction of KINDER i.e., KINDER and SFL go up and down completely randomly.

Pair Corralation between KINDER and SFL

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to under-perform the SFL. In addition to that, KINDER is 1.52 times more volatile than SFL Corporation. It trades about -0.04 of its total potential returns per unit of risk. SFL Corporation is currently generating about 0.12 per unit of volatility. If you would invest  1,018  in SFL Corporation on October 10, 2024 and sell it today you would earn a total of  34.00  from holding SFL Corporation or generate 3.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	90.48%
Values	Daily Returns

KINDER MORGAN INC  vs.  SFL Corp.

KINDER MORGAN INC

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in KINDER MORGAN INC are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. 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.

SFL Corporation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SFL Corporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent technical and fundamental indicators, SFL is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with KINDER and SFL

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

The idea behind KINDER MORGAN INC and SFL Corporation 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.

Check out your portfolio center.

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.