Correlation Between Kinder Morgan and Enbridge
Can any of the company-specific risk be diversified away by investing in both Kinder Morgan and Enbridge 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 Morgan and Enbridge into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kinder Morgan and Enbridge, you can compare the effects of market volatilities on Kinder Morgan and Enbridge 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 Morgan with a short position of Enbridge. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinder Morgan and Enbridge.
Diversification Opportunities for Kinder Morgan and Enbridge
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Kinder and Enbridge is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Kinder Morgan and Enbridge in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Enbridge and Kinder Morgan 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 are associated (or correlated) with Enbridge. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Enbridge has no effect on the direction of Kinder Morgan i.e., Kinder Morgan and Enbridge go up and down completely randomly.
Pair Corralation between Kinder Morgan and Enbridge
Assuming the 90 days horizon Kinder Morgan is expected to generate 1.52 times more return on investment than Enbridge. However, Kinder Morgan is 1.52 times more volatile than Enbridge. It trades about 0.22 of its potential returns per unit of risk. Enbridge is currently generating about 0.19 per unit of risk. If you would invest 1,696 in Kinder Morgan on August 28, 2024 and sell it today you would earn a total of 987.00 from holding Kinder Morgan or generate 58.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinder Morgan vs. Enbridge
Performance |
| Timeline |
| Kinder Morgan |
| Enbridge |
Kinder Morgan and Enbridge Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinder Morgan and Enbridge
The main advantage of trading using opposite Kinder Morgan and Enbridge positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinder Morgan position performs unexpectedly, Enbridge 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 Enbridge will offset losses from the drop in Enbridge's long position.| Kinder Morgan vs. Thai Beverage Public | Kinder Morgan vs. Goodyear Tire Rubber | Kinder Morgan vs. Fevertree Drinks PLC | Kinder Morgan vs. Summit Materials |
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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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