Correlation Between Williams Companies and Kinder Morgan

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

By analyzing existing cross correlation between The Williams Companies and Kinder Morgan, you can compare the effects of market volatilities on Williams Companies and Kinder Morgan 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 Williams Companies with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Williams Companies and Kinder Morgan.

Diversification Opportunities for Williams Companies and Kinder Morgan

0.98

Correlation Coefficient

Williams Companies  Kinder Morgan

Almost no diversification

The 3 months correlation between Williams and Kinder is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding The Williams Companies and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Williams Companies 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 The Williams Companies are associated (or correlated) with Kinder Morgan. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinder Morgan has no effect on the direction of Williams Companies i.e., Williams Companies and Kinder Morgan go up and down completely randomly.

Pair Corralation between Williams Companies and Kinder Morgan

Assuming the 90 days horizon The Williams Companies is expected to under-perform the Kinder Morgan. In addition to that, Williams Companies is 1.26 times more volatile than Kinder Morgan. It trades about -0.21 of its total potential returns per unit of risk. Kinder Morgan is currently generating about 0.0 per unit of volatility. If you would invest  2,603  in Kinder Morgan on October 1, 2024 and sell it today you would lose (3.00) from holding Kinder Morgan or give up 0.12% of portfolio value over 90 days.

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

The Williams Companies  vs.  Kinder Morgan

The Williams Companies

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Williams Companies are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Williams Companies reported solid returns over the last few months and may actually be approaching a breakup point.

Kinder Morgan

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinder Morgan are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kinder Morgan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Williams Companies and Kinder Morgan

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

The idea behind The Williams Companies and Kinder Morgan 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.