Correlation Between Western Midstream and Kirklands
Can any of the company-specific risk be diversified away by investing in both Western Midstream and Kirklands 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 Western Midstream and Kirklands into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western Midstream Partners and Kirklands, you can compare the effects of market volatilities on Western Midstream and Kirklands 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 Western Midstream with a short position of Kirklands. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Kirklands.
Diversification Opportunities for Western Midstream and Kirklands
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Western and Kirklands is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Kirklands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kirklands and Western Midstream 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 Western Midstream Partners are associated (or correlated) with Kirklands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kirklands has no effect on the direction of Western Midstream i.e., Western Midstream and Kirklands go up and down completely randomly.
Pair Corralation between Western Midstream and Kirklands
Considering the 90-day investment horizon Western Midstream Partners is expected to generate 0.37 times more return on investment than Kirklands. However, Western Midstream Partners is 2.73 times less risky than Kirklands. It trades about 0.13 of its potential returns per unit of risk. Kirklands is currently generating about -0.03 per unit of risk. If you would invest 2,500 in Western Midstream Partners on September 4, 2024 and sell it today you would earn a total of 1,482 from holding Western Midstream Partners or generate 59.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Midstream Partners vs. Kirklands
Performance |
| Timeline |
| Western Midstream |
| Kirklands |
Western Midstream and Kirklands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and Kirklands
The main advantage of trading using opposite Western Midstream and Kirklands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream position performs unexpectedly, Kirklands 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 Kirklands will offset losses from the drop in Kirklands' long position.| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
| Kirklands vs. Floor Decor Holdings | Kirklands vs. Live Ventures | Kirklands vs. Arhaus Inc | Kirklands vs. Home Depot |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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