Correlation Between KDA and TC Energy
Can any of the company-specific risk be diversified away by investing in both KDA and TC Energy 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 KDA and TC Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between KDA Group and TC Energy Corp, you can compare the effects of market volatilities on KDA and TC Energy 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 KDA with a short position of TC Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of KDA and TC Energy.
Diversification Opportunities for KDA and TC Energy
Excellent diversification
The 3 months correlation between KDA and TRP is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding KDA Group and TC Energy Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Energy Corp and KDA 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 KDA Group are associated (or correlated) with TC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Energy Corp has no effect on the direction of KDA i.e., KDA and TC Energy go up and down completely randomly.
Pair Corralation between KDA and TC Energy
Assuming the 90 days horizon KDA Group is expected to generate 3.93 times more return on investment than TC Energy. However, KDA is 3.93 times more volatile than TC Energy Corp. It trades about 0.4 of its potential returns per unit of risk. TC Energy Corp is currently generating about -0.19 per unit of risk. If you would invest 21.00 in KDA Group on September 15, 2024 and sell it today you would earn a total of 7.00 from holding KDA Group or generate 33.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
KDA Group vs. TC Energy Corp
Performance |
| Timeline |
| KDA Group |
| TC Energy Corp |
KDA and TC Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with KDA and TC Energy
The main advantage of trading using opposite KDA and TC Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if KDA position performs unexpectedly, TC Energy 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 TC Energy will offset losses from the drop in TC Energy's long position.The idea behind KDA Group and TC Energy Corp 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.| TC Energy vs. Enbridge | TC Energy vs. BCE Inc | TC Energy vs. Fortis Inc | TC Energy vs. Pembina Pipeline Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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