Correlation Between Consumers Energy and Kenon Holdings

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

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

Diversification Opportunities for Consumers Energy and Kenon Holdings

-0.73

Correlation Coefficient

Consumers Energy  Kenon Holdings

Pay attention - limited upside

The 3 months correlation between Consumers and Kenon is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding Consumers Energy and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Consumers Energy 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 Consumers Energy 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 Consumers Energy i.e., Consumers Energy and Kenon Holdings go up and down completely randomly.

Pair Corralation between Consumers Energy and Kenon Holdings

Assuming the 90 days trading horizon Consumers Energy is expected to under-perform the Kenon Holdings. But the preferred stock apears to be less risky and, when comparing its historical volatility, Consumers Energy is 1.41 times less risky than Kenon Holdings. The preferred stock trades about -0.23 of its potential returns per unit of risk. The Kenon Holdings is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  2,703  in Kenon Holdings on September 25, 2024 and sell it today you would earn a total of  272.00  from holding Kenon Holdings or generate 10.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	97.62%
Values	Daily Returns

Consumers Energy  vs.  Kenon Holdings

Consumers Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Consumers Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Preferred Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Kenon Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Kenon Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Consumers Energy and Kenon Holdings

The main advantage of trading using opposite Consumers Energy and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consumers Energy 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 Consumers Energy 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..