Correlation Between Empresa Distribuidora and Kenon Holdings

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

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

Diversification Opportunities for Empresa Distribuidora and Kenon Holdings

0.89

Correlation Coefficient

Empresa Distribuidora  Kenon Holdings

Very poor diversification

The 3 months correlation between Empresa and Kenon is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Empresa Distribuidora y and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Empresa Distribuidora 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 Empresa Distribuidora y 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 Empresa Distribuidora i.e., Empresa Distribuidora and Kenon Holdings go up and down completely randomly.

Pair Corralation between Empresa Distribuidora and Kenon Holdings

Considering the 90-day investment horizon Empresa Distribuidora y is expected to generate 1.74 times more return on investment than Kenon Holdings. However, Empresa Distribuidora is 1.74 times more volatile than Kenon Holdings. It trades about 0.14 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.1 per unit of risk. If you would invest  1,433  in Empresa Distribuidora y on September 15, 2024 and sell it today you would earn a total of  3,490  from holding Empresa Distribuidora y or generate 243.55% return on investment over 90 days.

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

Empresa Distribuidora y  vs.  Kenon Holdings

Empresa Distribuidora

Risk-Adjusted Performance

30 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Empresa Distribuidora y are ranked lower than 30 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, Empresa Distribuidora displayed solid returns over the last few months and may actually be approaching a breakup point.

Kenon Holdings

Risk-Adjusted Performance

13 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 13 (%) 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 Empresa Distribuidora and Kenon Holdings

The main advantage of trading using opposite Empresa Distribuidora and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Empresa Distribuidora 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 Empresa Distribuidora y 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.