Correlation Between Bayside Land and Kenon Holdings

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

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

Diversification Opportunities for Bayside Land and Kenon Holdings

-0.33

Correlation Coefficient

Bayside Land  Kenon Holdings

Very good diversification

The 3 months correlation between Bayside and Kenon is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding Bayside Land and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Bayside Land 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 Bayside Land are associated (or correlated) with Kenon Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kenon Holdings has no effect on the direction of Bayside Land i.e., Bayside Land and Kenon Holdings go up and down completely randomly.

Pair Corralation between Bayside Land and Kenon Holdings

Assuming the 90 days trading horizon Bayside Land is expected to under-perform the Kenon Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Bayside Land is 1.96 times less risky than Kenon Holdings. The stock trades about -0.08 of its potential returns per unit of risk. The Kenon Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  980,300  in Kenon Holdings on October 10, 2024 and sell it today you would earn a total of  165,700  from holding Kenon Holdings or generate 16.9% return on investment over 90 days.

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

Bayside Land  vs.  Kenon Holdings

Bayside Land

Risk-Adjusted Performance

0 of 100

Very Weak

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

Kenon Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Kenon Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bayside Land and Kenon Holdings

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

The idea behind Bayside Land and Kenon 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.