Correlation Between GENERAL and Kinetik Holdings

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

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

Diversification Opportunities for GENERAL and Kinetik Holdings

0.64

Correlation Coefficient

GENERAL  Kinetik Holdings

Poor diversification

The 3 months correlation between GENERAL and Kinetik is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding GENERAL ELEC CAP and Kinetik Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kinetik Holdings and GENERAL 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 GENERAL ELEC CAP 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 GENERAL i.e., GENERAL and Kinetik Holdings go up and down completely randomly.

Pair Corralation between GENERAL and Kinetik Holdings

Assuming the 90 days trading horizon GENERAL ELEC CAP is expected to under-perform the Kinetik Holdings. But the bond apears to be less risky and, when comparing its historical volatility, GENERAL ELEC CAP is 2.4 times less risky than Kinetik Holdings. The bond trades about -0.13 of its potential returns per unit of risk. The Kinetik Holdings is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  5,571  in Kinetik Holdings on September 14, 2024 and sell it today you would earn a total of  244.00  from holding Kinetik Holdings or generate 4.38% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	38.1%
Values	Daily Returns

GENERAL ELEC CAP  vs.  Kinetik Holdings

GENERAL ELEC CAP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GENERAL ELEC CAP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, GENERAL is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Kinetik Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinetik Holdings are ranked lower than 16 (%) 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.

Pair Trading with GENERAL and Kinetik Holdings

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

The idea behind GENERAL ELEC CAP and Kinetik Holdings 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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.