Correlation Between Kinder Morgan and Pembina Pipeline
Can any of the company-specific risk be diversified away by investing in both Kinder Morgan and Pembina Pipeline 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 Pembina Pipeline into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kinder Morgan and Pembina Pipeline Corp, you can compare the effects of market volatilities on Kinder Morgan and Pembina Pipeline 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 Pembina Pipeline. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinder Morgan and Pembina Pipeline.
Diversification Opportunities for Kinder Morgan and Pembina Pipeline
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kinder and Pembina is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Kinder Morgan and Pembina Pipeline Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pembina Pipeline Corp 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 Pembina Pipeline. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pembina Pipeline Corp has no effect on the direction of Kinder Morgan i.e., Kinder Morgan and Pembina Pipeline go up and down completely randomly.
Pair Corralation between Kinder Morgan and Pembina Pipeline
Assuming the 90 days horizon Kinder Morgan is expected to generate 1.29 times more return on investment than Pembina Pipeline. However, Kinder Morgan is 1.29 times more volatile than Pembina Pipeline Corp. It trades about 0.14 of its potential returns per unit of risk. Pembina Pipeline Corp is currently generating about 0.13 per unit of risk. If you would invest 1,420 in Kinder Morgan on August 28, 2024 and sell it today you would earn a total of 1,263 from holding Kinder Morgan or generate 88.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinder Morgan vs. Pembina Pipeline Corp
Performance |
| Timeline |
| Kinder Morgan |
| Pembina Pipeline Corp |
Kinder Morgan and Pembina Pipeline Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinder Morgan and Pembina Pipeline
The main advantage of trading using opposite Kinder Morgan and Pembina Pipeline positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinder Morgan position performs unexpectedly, Pembina Pipeline 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 Pembina Pipeline will offset losses from the drop in Pembina Pipeline'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 |
| Pembina Pipeline vs. Kinder Morgan | Pembina Pipeline vs. The Williams Companies | Pembina Pipeline vs. ONEOK Inc |
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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