Correlation Between Kinder Morgan and BP Prudhoe
Can any of the company-specific risk be diversified away by investing in both Kinder Morgan and BP Prudhoe 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 BP Prudhoe into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Kinder Morgan and BP Prudhoe Bay, you can compare the effects of market volatilities on Kinder Morgan and BP Prudhoe 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 BP Prudhoe. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinder Morgan and BP Prudhoe.
Diversification Opportunities for Kinder Morgan and BP Prudhoe
-0.66 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Kinder and BPT is -0.66. Overlapping area represents the amount of risk that can be diversified away by holding Kinder Morgan and BP Prudhoe Bay in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BP Prudhoe Bay 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 BP Prudhoe. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BP Prudhoe Bay has no effect on the direction of Kinder Morgan i.e., Kinder Morgan and BP Prudhoe go up and down completely randomly.
Pair Corralation between Kinder Morgan and BP Prudhoe
Considering the 90-day investment horizon Kinder Morgan is expected to generate 0.25 times more return on investment than BP Prudhoe. However, Kinder Morgan is 4.06 times less risky than BP Prudhoe. It trades about 0.11 of its potential returns per unit of risk. BP Prudhoe Bay is currently generating about -0.08 per unit of risk. If you would invest 1,545 in Kinder Morgan on August 30, 2024 and sell it today you would earn a total of 1,262 from holding Kinder Morgan or generate 81.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Kinder Morgan vs. BP Prudhoe Bay
Performance |
| Timeline |
| Kinder Morgan |
| BP Prudhoe Bay |
Kinder Morgan and BP Prudhoe Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kinder Morgan and BP Prudhoe
The main advantage of trading using opposite Kinder Morgan and BP Prudhoe positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinder Morgan position performs unexpectedly, BP Prudhoe 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 BP Prudhoe will offset losses from the drop in BP Prudhoe's long position.| Kinder Morgan vs. ONEOK Inc | Kinder Morgan vs. MPLX LP | Kinder Morgan vs. Enterprise Products Partners | Kinder Morgan vs. Energy Transfer LP |
| BP Prudhoe vs. Viper Energy Ut | BP Prudhoe vs. FLEX LNG | BP Prudhoe vs. Hess Midstream Partners | BP Prudhoe vs. Frontline |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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