Correlation Between KINDER and Globalfoundries

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

Diversification Opportunities for KINDER and Globalfoundries

0.1

Correlation Coefficient

KINDER  Globalfoundries

Average diversification

The 3 months correlation between KINDER and Globalfoundries is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding KINDER MORGAN INC and Globalfoundries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Globalfoundries 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 Globalfoundries. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Globalfoundries has no effect on the direction of KINDER i.e., KINDER and Globalfoundries go up and down completely randomly.

Pair Corralation between KINDER and Globalfoundries

Assuming the 90 days trading horizon KINDER MORGAN INC is expected to generate 0.38 times more return on investment than Globalfoundries. However, KINDER MORGAN INC is 2.62 times less risky than Globalfoundries. It trades about -0.02 of its potential returns per unit of risk. Globalfoundries is currently generating about -0.08 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	Moves Together
Strength	Insignificant
Accuracy	82.93%
Values	Daily Returns

KINDER MORGAN INC  vs.  Globalfoundries

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

Globalfoundries

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Globalfoundries are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak technical and fundamental indicators, Globalfoundries may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with KINDER and Globalfoundries

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

The idea behind KINDER MORGAN INC and Globalfoundries 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.