Correlation Between Western Midstream and Kinetik Holdings
Can any of the company-specific risk be diversified away by investing in both Western Midstream and Kinetik Holdings 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 Kinetik Holdings 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 Kinetik Holdings, you can compare the effects of market volatilities on Western Midstream and Kinetik Holdings 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 Kinetik Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western Midstream and Kinetik Holdings.
Diversification Opportunities for Western Midstream and Kinetik Holdings
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Western and Kinetik is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Western Midstream Partners and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings 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 Kinetik Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kinetik Holdings has no effect on the direction of Western Midstream i.e., Western Midstream and Kinetik Holdings go up and down completely randomly.
Pair Corralation between Western Midstream and Kinetik Holdings
Considering the 90-day investment horizon Western Midstream is expected to generate 1.69 times less return on investment than Kinetik Holdings. But when comparing it to its historical volatility, Western Midstream Partners is 1.14 times less risky than Kinetik Holdings. It trades about 0.08 of its potential returns per unit of risk. Kinetik Holdings is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 2,517 in Kinetik Holdings on August 27, 2024 and sell it today you would earn a total of 3,648 from holding Kinetik Holdings or generate 144.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Western Midstream Partners vs. Kinetik Holdings
Performance |
| Timeline |
| Western Midstream |
| Kinetik Holdings |
Western Midstream and Kinetik Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Western Midstream and Kinetik Holdings
The main advantage of trading using opposite Western Midstream and Kinetik Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western Midstream position performs unexpectedly, Kinetik Holdings 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 Kinetik Holdings will offset losses from the drop in Kinetik Holdings' long position.| Western Midstream vs. DT Midstream | Western Midstream vs. MPLX LP | Western Midstream vs. Plains All American | Western Midstream vs. Genesis Energy LP |
| Kinetik Holdings vs. Western Midstream Partners | Kinetik Holdings vs. DT Midstream | Kinetik Holdings vs. MPLX LP | Kinetik Holdings vs. Hess 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 Global Correlations module to find global opportunities by holding instruments from different markets.
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