Correlation Between Kinetik Holdings and NGL Energy

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

By analyzing existing cross correlation between Kinetik Holdings and NGL Energy Partners, you can compare the effects of market volatilities on Kinetik Holdings and NGL Energy 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 NGL Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kinetik Holdings and NGL Energy.

Diversification Opportunities for Kinetik Holdings and NGL Energy

0.61

Correlation Coefficient

Kinetik Holdings  NGL Energy

Poor diversification

The 3 months correlation between Kinetik and NGL is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Kinetik Holdings and NGL Energy Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NGL Energy Partners 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 NGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NGL Energy Partners has no effect on the direction of Kinetik Holdings i.e., Kinetik Holdings and NGL Energy go up and down completely randomly.

Pair Corralation between Kinetik Holdings and NGL Energy

Given the investment horizon of 90 days Kinetik Holdings is expected to under-perform the NGL Energy. In addition to that, Kinetik Holdings is 3.92 times more volatile than NGL Energy Partners. It trades about -0.09 of its total potential returns per unit of risk. NGL Energy Partners is currently generating about 0.07 per unit of volatility. If you would invest  2,372  in NGL Energy Partners on September 29, 2024 and sell it today you would earn a total of  17.00  from holding NGL Energy Partners or generate 0.72% return on investment over 90 days.

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

Kinetik Holdings  vs.  NGL Energy Partners

Kinetik Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Kinetik Holdings disclosed solid returns over the last few months and may actually be approaching a breakup point.

NGL Energy Partners

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in NGL Energy Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound essential indicators, NGL Energy is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kinetik Holdings and NGL Energy

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

The idea behind Kinetik Holdings and NGL Energy Partners 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.