Correlation Between Plains GP and Kinder Morgan
Can any of the company-specific risk be diversified away by investing in both Plains GP 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 Plains GP and Kinder Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plains GP Holdings and Kinder Morgan, you can compare the effects of market volatilities on Plains GP 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 Plains GP with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plains GP and Kinder Morgan.
Diversification Opportunities for Plains GP and Kinder Morgan
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Plains and Kinder is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Plains GP Holdings and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Plains GP 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 Plains GP Holdings 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 Plains GP i.e., Plains GP and Kinder Morgan go up and down completely randomly.
Pair Corralation between Plains GP and Kinder Morgan
Given the investment horizon of 90 days Plains GP Holdings is expected to generate 1.18 times more return on investment than Kinder Morgan. However, Plains GP is 1.18 times more volatile than Kinder Morgan. It trades about 0.1 of its potential returns per unit of risk. Kinder Morgan is currently generating about 0.11 per unit of risk. If you would invest 1,059 in Plains GP Holdings on September 2, 2024 and sell it today you would earn a total of 943.00 from holding Plains GP Holdings or generate 89.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Plains GP Holdings vs. Kinder Morgan
Performance |
| Timeline |
| Plains GP Holdings |
| Kinder Morgan |
Plains GP and Kinder Morgan Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Plains GP and Kinder Morgan
The main advantage of trading using opposite Plains GP and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plains GP 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.| Plains GP vs. Targa Resources | Plains GP vs. Western Midstream Partners | Plains GP vs. MPLX LP | Plains GP vs. Plains All American |
| Kinder Morgan vs. Plains All American | Kinder Morgan vs. Hess Midstream Partners | Kinder Morgan vs. Plains GP Holdings | Kinder Morgan vs. Antero 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
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