Correlation Between Citigroup and Kinder Morgan

Can any of the company-specific risk be diversified away by investing in both Citigroup 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 Citigroup and Kinder Morgan into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Citigroup and Kinder Morgan, you can compare the effects of market volatilities on Citigroup 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 Citigroup with a short position of Kinder Morgan. Check out your portfolio center. Please also check ongoing floating volatility patterns of Citigroup and Kinder Morgan.

Diversification Opportunities for Citigroup and Kinder Morgan

0.9

Correlation Coefficient

Citigroup  Kinder Morgan

Almost no diversification

The 3 months correlation between Citigroup and Kinder is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Citigroup and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Citigroup 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 Citigroup 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 Citigroup i.e., Citigroup and Kinder Morgan go up and down completely randomly.

Pair Corralation between Citigroup and Kinder Morgan

Taking into account the 90-day investment horizon Citigroup is expected to generate 1.28 times less return on investment than Kinder Morgan. But when comparing it to its historical volatility, Citigroup is 1.13 times less risky than Kinder Morgan. It trades about 0.14 of its potential returns per unit of risk. Kinder Morgan is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,260  in Kinder Morgan on September 23, 2024 and sell it today you would earn a total of  318.00  from holding Kinder Morgan or generate 14.07% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	97.73%
Values	Daily Returns

Citigroup  vs.  Kinder Morgan

Citigroup

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Citigroup are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain fundamental indicators, Citigroup may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Kinder Morgan

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinder Morgan are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Kinder Morgan reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Citigroup and Kinder Morgan

The main advantage of trading using opposite Citigroup and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Citigroup 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.

The idea behind Citigroup and Kinder Morgan pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Bonds Directory module to find actively traded corporate debentures issued by US companies.