Correlation Between Kinetik Holdings and American Aires

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

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

Diversification Opportunities for Kinetik Holdings and American Aires

-0.88

Correlation Coefficient

Kinetik Holdings  American Aires

Pay attention - limited upside

The 3 months correlation between Kinetik and American is -0.88. Overlapping area represents the amount of risk that can be diversified away by holding Kinetik Holdings and American Aires in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Aires and Kinetik Holdings 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 Kinetik Holdings are associated (or correlated) with American Aires. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Aires has no effect on the direction of Kinetik Holdings i.e., Kinetik Holdings and American Aires go up and down completely randomly.

Pair Corralation between Kinetik Holdings and American Aires

Given the investment horizon of 90 days Kinetik Holdings is expected to generate 0.36 times more return on investment than American Aires. However, Kinetik Holdings is 2.78 times less risky than American Aires. It trades about 0.18 of its potential returns per unit of risk. American Aires is currently generating about -0.16 per unit of risk. If you would invest  4,513  in Kinetik Holdings on September 18, 2024 and sell it today you would earn a total of  1,130  from holding Kinetik Holdings or generate 25.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Kinetik Holdings  vs.  American Aires

Kinetik Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

American Aires

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days American Aires has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Kinetik Holdings and American Aires

The main advantage of trading using opposite Kinetik Holdings and American Aires positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kinetik Holdings position performs unexpectedly, American Aires 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 American Aires will offset losses from the drop in American Aires' long position.

The idea behind Kinetik Holdings and American Aires 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.