Correlation Between Knife River and Western Midstream
Can any of the company-specific risk be diversified away by investing in both Knife River and Western Midstream 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 Knife River and Western Midstream into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Knife River and Western Midstream Partners, you can compare the effects of market volatilities on Knife River and Western Midstream 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 Knife River with a short position of Western Midstream. Check out your portfolio center. Please also check ongoing floating volatility patterns of Knife River and Western Midstream.
Diversification Opportunities for Knife River and Western Midstream
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Knife and Western is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Knife River and Western Midstream Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western Midstream and Knife River 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 Knife River are associated (or correlated) with Western Midstream. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western Midstream has no effect on the direction of Knife River i.e., Knife River and Western Midstream go up and down completely randomly.
Pair Corralation between Knife River and Western Midstream
Considering the 90-day investment horizon Knife River is expected to generate 1.99 times more return on investment than Western Midstream. However, Knife River is 1.99 times more volatile than Western Midstream Partners. It trades about 0.13 of its potential returns per unit of risk. Western Midstream Partners is currently generating about 0.04 per unit of risk. If you would invest 9,258 in Knife River on August 23, 2024 and sell it today you would earn a total of 792.00 from holding Knife River or generate 8.55% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Knife River vs. Western Midstream Partners
Performance |
| Timeline |
| Knife River |
| Western Midstream |
Knife River and Western Midstream Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Knife River and Western Midstream
The main advantage of trading using opposite Knife River and Western Midstream positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Knife River position performs unexpectedly, Western Midstream 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 Western Midstream will offset losses from the drop in Western Midstream's long position.| Knife River vs. Cemex SAB de | Knife River vs. Boise Cascad Llc | Knife River vs. CRH PLC ADR | Knife River vs. Eagle Materials |
| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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