Correlation Between Apple and Kinder Morgan
Can any of the company-specific risk be diversified away by investing in both Apple 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 Apple and Kinder Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Apple Inc and Kinder Morgan, you can compare the effects of market volatilities on Apple 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 Apple with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Apple and Kinder Morgan.
Diversification Opportunities for Apple and Kinder Morgan
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Apple and Kinder is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Apple Inc and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Apple 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 Apple Inc 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 Apple i.e., Apple and Kinder Morgan go up and down completely randomly.
Pair Corralation between Apple and Kinder Morgan
Assuming the 90 days trading horizon Apple is expected to generate 1.65 times less return on investment than Kinder Morgan. But when comparing it to its historical volatility, Apple Inc is 2.75 times less risky than Kinder Morgan. It trades about 0.5 of its potential returns per unit of risk. Kinder Morgan is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest 2,246 in Kinder Morgan on September 1, 2024 and sell it today you would earn a total of 403.00 from holding Kinder Morgan or generate 17.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
Apple Inc vs. Kinder Morgan
Performance |
| Timeline |
| Apple Inc |
| Kinder Morgan |
Apple and Kinder Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Apple and Kinder Morgan
The main advantage of trading using opposite Apple and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Apple 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.| Apple vs. CyberArk Software | Apple vs. GEAR4MUSIC LS 10 | Apple vs. GAMESTOP | Apple vs. FORMPIPE SOFTWARE AB |
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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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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