Correlation Between Terra Firma and Kenon Holdings

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

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

Diversification Opportunities for Terra Firma and Kenon Holdings

0.46

Correlation Coefficient

Terra Firma  Kenon Holdings

Very weak diversification

The 3 months correlation between Terra and Kenon is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding Terra Firma Capital and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Terra Firma 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 Terra Firma Capital 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 Terra Firma i.e., Terra Firma and Kenon Holdings go up and down completely randomly.

Pair Corralation between Terra Firma and Kenon Holdings

If you would invest  2,780  in Kenon Holdings on October 27, 2024 and sell it today you would earn a total of  410.00  from holding Kenon Holdings or generate 14.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	1.67%
Values	Daily Returns

Terra Firma Capital  vs.  Kenon Holdings

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.

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.

Pair Trading with Terra Firma and Kenon Holdings

The main advantage of trading using opposite Terra Firma and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Terra Firma 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 Terra Firma Capital 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.