Correlation Between Kenon Holdings and Terra Firma

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

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

Diversification Opportunities for Kenon Holdings and Terra Firma

0.46

Correlation Coefficient

Kenon Holdings  Terra Firma

Very weak diversification

The 3 months correlation between Kenon and Terra is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and Terra Firma Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Terra Firma Capital 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 Terra Firma. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Terra Firma Capital has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and Terra Firma go up and down completely randomly.

Pair Corralation between Kenon Holdings and Terra Firma

Considering the 90-day investment horizon Kenon Holdings is expected to generate 17.5 times more return on investment than Terra Firma. However, Kenon Holdings is 17.5 times more volatile than Terra Firma Capital. It trades about 0.06 of its potential returns per unit of risk. Terra Firma Capital is currently generating about 0.1 per unit of risk. If you would invest  1,881  in Kenon Holdings on October 26, 2024 and sell it today you would earn a total of  1,309  from holding Kenon Holdings or generate 69.59% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	20.04%
Values	Daily Returns

Kenon Holdings  vs.  Terra Firma Capital

Kenon Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 9 (%) 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.

Terra Firma Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Terra Firma Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Terra Firma is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Kenon Holdings and Terra Firma

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

The idea behind Kenon Holdings and Terra Firma Capital 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 Commodity Directory module to find actively traded commodities issued by global exchanges.