Correlation Between Kenon Holdings and Black Hills

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

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

Diversification Opportunities for Kenon Holdings and Black Hills

0.31

Correlation Coefficient

Kenon Holdings  Black Hills

Weak diversification

The 3 months correlation between Kenon and Black is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and Black Hills in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Black Hills and Kenon Holdings 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 Kenon Holdings are associated (or correlated) with Black Hills. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Black Hills has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and Black Hills go up and down completely randomly.

Pair Corralation between Kenon Holdings and Black Hills

Considering the 90-day investment horizon Kenon Holdings is expected to generate 5.36 times less return on investment than Black Hills. In addition to that, Kenon Holdings is 1.66 times more volatile than Black Hills. It trades about 0.0 of its total potential returns per unit of risk. Black Hills is currently generating about 0.04 per unit of volatility. If you would invest  5,789  in Black Hills on December 27, 2024 and sell it today you would earn a total of  159.00  from holding Black Hills or generate 2.75% return on investment over 90 days.

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

Kenon Holdings  vs.  Black Hills

Kenon Holdings

Risk-Adjusted Performance

Very Weak

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

Black Hills

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Black Hills are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong forward-looking signals, Black Hills is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Kenon Holdings and Black Hills

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

The idea behind Kenon Holdings and Black Hills 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.