Correlation Between KINDER and Analog Devices

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

Diversification Opportunities for KINDER and Analog Devices

0.0

Correlation Coefficient

KINDER  Analog Devices

Pay attention - limited upside

The 3 months correlation between KINDER and Analog is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and Analog Devices in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Analog Devices 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 Analog Devices. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Analog Devices has no effect on the direction of KINDER i.e., KINDER and Analog Devices go up and down completely randomly.

Pair Corralation between KINDER and Analog Devices

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to generate 0.53 times more return on investment than Analog Devices. However, KINDER MORGAN INC is 1.89 times less risky than Analog Devices. It trades about -0.02 of its potential returns per unit of risk. Analog Devices is currently generating about -0.06 per unit of risk. If you would invest  8,945  in KINDER MORGAN INC on October 7, 2024 and sell it today you would lose (59.00) from holding KINDER MORGAN INC or give up 0.66% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	82.93%
Values	Daily Returns

KINDER MORGAN INC  vs.  Analog Devices

KINDER MORGAN INC

Risk-Adjusted Performance

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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 newest stock price disturbance, may contribute to short-term losses for the investors.

Analog Devices

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Analog Devices has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental indicators, Analog Devices is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with KINDER and Analog Devices

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

The idea behind KINDER MORGAN INC and Analog Devices 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.