Correlation Between Eagle Materials and Kinder Morgan

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

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

Diversification Opportunities for Eagle Materials and Kinder Morgan

0.0

Correlation Coefficient

Eagle Materials  Kinder Morgan

Pay attention - limited upside

The 3 months correlation between Eagle and Kinder is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Eagle Materials and Kinder Morgan in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinder Morgan and Eagle Materials 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 Eagle Materials 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 Eagle Materials i.e., Eagle Materials and Kinder Morgan go up and down completely randomly.

Pair Corralation between Eagle Materials and Kinder Morgan

If you would invest  12,563  in Eagle Materials on September 24, 2024 and sell it today you would earn a total of  11,037  from holding Eagle Materials or generate 87.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Eagle Materials  vs.  Kinder Morgan

Eagle Materials

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Eagle Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Eagle Materials is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Kinder Morgan

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kinder Morgan has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound forward-looking signals, Kinder Morgan is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Eagle Materials and Kinder Morgan

The main advantage of trading using opposite Eagle Materials and Kinder Morgan positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Eagle Materials 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 Eagle Materials 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.