Correlation Between Williams Companies and ONEOK

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

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

Diversification Opportunities for Williams Companies and ONEOK

0.94

Correlation Coefficient

Williams Companies  ONEOK

Almost no diversification

The 3 months correlation between Williams and ONEOK is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding The Williams Companies and ONEOK Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ONEOK Inc and Williams Companies 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 The Williams Companies are associated (or correlated) with ONEOK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ONEOK Inc has no effect on the direction of Williams Companies i.e., Williams Companies and ONEOK go up and down completely randomly.

Pair Corralation between Williams Companies and ONEOK

Assuming the 90 days horizon The Williams Companies is expected to generate 0.86 times more return on investment than ONEOK. However, The Williams Companies is 1.17 times less risky than ONEOK. It trades about 0.32 of its potential returns per unit of risk. ONEOK Inc is currently generating about 0.24 per unit of risk. If you would invest  4,067  in The Williams Companies on September 3, 2024 and sell it today you would earn a total of  1,407  from holding The Williams Companies or generate 34.6% return on investment over 90 days.

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

The Williams Companies  vs.  ONEOK Inc

The Williams Companies

Risk-Adjusted Performance

24 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in The Williams Companies are ranked lower than 24 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Williams Companies reported solid returns over the last few months and may actually be approaching a breakup point.

ONEOK Inc

Risk-Adjusted Performance

18 of 100

Solid

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

Pair Trading with Williams Companies and ONEOK

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

The idea behind The Williams Companies and ONEOK Inc 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.

Check out your portfolio center.

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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.