Correlation Between Kinder Morgan and Tsakos Energy

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

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

Diversification Opportunities for Kinder Morgan and Tsakos Energy

0.07

Correlation Coefficient

Kinder Morgan  Tsakos Energy

Significant diversification

The 3 months correlation between Kinder and Tsakos is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Kinder Morgan and Tsakos Energy Navigation in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tsakos Energy Navigation and Kinder Morgan 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 Kinder Morgan are associated (or correlated) with Tsakos Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tsakos Energy Navigation has no effect on the direction of Kinder Morgan i.e., Kinder Morgan and Tsakos Energy go up and down completely randomly.

Pair Corralation between Kinder Morgan and Tsakos Energy

Considering the 90-day investment horizon Kinder Morgan is expected to generate 0.61 times more return on investment than Tsakos Energy. However, Kinder Morgan is 1.63 times less risky than Tsakos Energy. It trades about 0.61 of its potential returns per unit of risk. Tsakos Energy Navigation is currently generating about 0.08 per unit of risk. If you would invest  2,083  in Kinder Morgan on July 13, 2024 and sell it today you would earn a total of  387.00  from holding Kinder Morgan or generate 18.58% return on investment over 90 days.

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

Kinder Morgan  vs.  Tsakos Energy Navigation

Kinder Morgan

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kinder Morgan are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady primary indicators, Kinder Morgan demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Tsakos Energy Navigation

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tsakos Energy Navigation has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Tsakos Energy is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Kinder Morgan and Tsakos Energy

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

The idea behind Kinder Morgan and Tsakos Energy Navigation 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.