Correlation Between Aris Water and Kinetik Holdings
Can any of the company-specific risk be diversified away by investing in both Aris Water and Kinetik Holdings 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 Aris Water and Kinetik Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Aris Water Solutions and Kinetik Holdings, you can compare the effects of market volatilities on Aris Water and Kinetik Holdings 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 Aris Water with a short position of Kinetik Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Aris Water and Kinetik Holdings.
Diversification Opportunities for Aris Water and Kinetik Holdings
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Aris and Kinetik is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Aris Water Solutions and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings and Aris Water 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 Aris Water Solutions are associated (or correlated) with Kinetik Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetik Holdings has no effect on the direction of Aris Water i.e., Aris Water and Kinetik Holdings go up and down completely randomly.
Pair Corralation between Aris Water and Kinetik Holdings
Given the investment horizon of 90 days Aris Water Solutions is expected to generate 2.41 times more return on investment than Kinetik Holdings. However, Aris Water is 2.41 times more volatile than Kinetik Holdings. It trades about 0.4 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.33 per unit of risk. If you would invest 1,631 in Aris Water Solutions on August 31, 2024 and sell it today you would earn a total of 1,055 from holding Aris Water Solutions or generate 64.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Aris Water Solutions vs. Kinetik Holdings
Performance |
| Timeline |
| Aris Water Solutions |
| Kinetik Holdings |
Aris Water and Kinetik Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Aris Water and Kinetik Holdings
The main advantage of trading using opposite Aris Water and Kinetik Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Aris Water position performs unexpectedly, Kinetik Holdings 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 Kinetik Holdings will offset losses from the drop in Kinetik Holdings' long position.| Aris Water vs. Middlesex Water | Aris Water vs. California Water Service | Aris Water vs. Global Water Resources | Aris Water vs. American States Water |
| Kinetik Holdings vs. Western Midstream Partners | Kinetik Holdings vs. DT Midstream | Kinetik Holdings vs. MPLX LP | Kinetik Holdings vs. Hess Midstream Partners |
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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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