Correlation Between Kenon Holdings and Reservoir Media

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

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

Diversification Opportunities for Kenon Holdings and Reservoir Media

-0.22

Correlation Coefficient

Kenon Holdings  Reservoir Media

Very good diversification

The 3 months correlation between Kenon and Reservoir is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and Reservoir Media in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Reservoir Media 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 Reservoir Media. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Reservoir Media has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and Reservoir Media go up and down completely randomly.

Pair Corralation between Kenon Holdings and Reservoir Media

Considering the 90-day investment horizon Kenon Holdings is expected to generate 1.18 times more return on investment than Reservoir Media. However, Kenon Holdings is 1.18 times more volatile than Reservoir Media. It trades about 0.0 of its potential returns per unit of risk. Reservoir Media is currently generating about -0.19 per unit of risk. If you would invest  3,192  in Kenon Holdings on December 28, 2024 and sell it today you would lose (27.00) from holding Kenon Holdings or give up 0.85% of portfolio value over 90 days.

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

Kenon Holdings  vs.  Reservoir Media

Kenon Holdings

Risk-Adjusted Performance

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 current stock price disarray, may contribute to short-term losses for the investors.

Reservoir Media

Risk-Adjusted Performance

Very Weak

Over the last 90 days Reservoir Media has generated negative risk-adjusted returns adding no value to investors with long positions. Even with weak performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Kenon Holdings and Reservoir Media

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

The idea behind Kenon Holdings and Reservoir Media 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.