Correlation Between Kenon Holdings and TransAlta Corp

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

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

Diversification Opportunities for Kenon Holdings and TransAlta Corp

0.15

Correlation Coefficient

Kenon Holdings  TransAlta Corp

Average diversification

The 3 months correlation between Kenon and TransAlta is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and TransAlta Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TransAlta Corp 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 TransAlta Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TransAlta Corp has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and TransAlta Corp go up and down completely randomly.

Pair Corralation between Kenon Holdings and TransAlta Corp

Considering the 90-day investment horizon Kenon Holdings is expected to generate 0.55 times more return on investment than TransAlta Corp. However, Kenon Holdings is 1.83 times less risky than TransAlta Corp. It trades about 0.06 of its potential returns per unit of risk. TransAlta Corp is currently generating about -0.01 per unit of risk. If you would invest  2,985  in Kenon Holdings on November 28, 2024 and sell it today you would earn a total of  182.00  from holding Kenon Holdings or generate 6.1% return on investment over 90 days.

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

Kenon Holdings  vs.  TransAlta Corp

Kenon Holdings

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 4 (%) 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 March 2025.

TransAlta Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days TransAlta Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, TransAlta Corp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Kenon Holdings and TransAlta Corp

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

The idea behind Kenon Holdings and TransAlta Corp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.