Correlation Between Cheniere Energy and Kenon Holdings

Can any of the company-specific risk be diversified away by investing in both Cheniere 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 Cheniere 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 Cheniere Energy Partners and Kenon Holdings, you can compare the effects of market volatilities on Cheniere 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 Cheniere Energy with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cheniere Energy and Kenon Holdings.

Diversification Opportunities for Cheniere Energy and Kenon Holdings

0.73

Correlation Coefficient

Cheniere Energy  Kenon Holdings

Poor diversification

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

Pair Corralation between Cheniere Energy and Kenon Holdings

Considering the 90-day investment horizon Cheniere Energy is expected to generate 1.25 times less return on investment than Kenon Holdings. But when comparing it to its historical volatility, Cheniere Energy Partners is 1.33 times less risky than Kenon Holdings. It trades about 0.21 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  2,475  in Kenon Holdings on September 4, 2024 and sell it today you would earn a total of  605.00  from holding Kenon Holdings or generate 24.44% return on investment over 90 days.

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

Cheniere Energy Partners  vs.  Kenon Holdings

Cheniere Energy Partners

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cheniere Energy Partners are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Cheniere Energy reported solid returns over the last few months and may actually be approaching a breakup point.

Kenon Holdings

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Kenon Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cheniere Energy and Kenon Holdings

The main advantage of trading using opposite Cheniere Energy and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cheniere 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 Cheniere Energy Partners 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 CEOs Directory module to screen CEOs from public companies around the world.