Correlation Between Kenon Holdings and AGL Energy

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

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

Diversification Opportunities for Kenon Holdings and AGL Energy

-0.53

Correlation Coefficient

Kenon Holdings  AGL Energy

Excellent diversification

The 3 months correlation between Kenon and AGL is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and AGL Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGL Energy 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 AGL Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGL Energy has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and AGL Energy go up and down completely randomly.

Pair Corralation between Kenon Holdings and AGL Energy

Considering the 90-day investment horizon Kenon Holdings is expected to generate 0.59 times more return on investment than AGL Energy. However, Kenon Holdings is 1.69 times less risky than AGL Energy. It trades about 0.18 of its potential returns per unit of risk. AGL Energy is currently generating about 0.0 per unit of risk. If you would invest  2,457  in Kenon Holdings on September 2, 2024 and sell it today you would earn a total of  528.00  from holding Kenon Holdings or generate 21.49% return on investment over 90 days.

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

Kenon Holdings  vs.  AGL Energy

Kenon Holdings

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 14 (%) 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.

AGL Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AGL Energy has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, AGL Energy is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kenon Holdings and AGL Energy

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

The idea behind Kenon Holdings and AGL Energy 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.

Check out your portfolio center.

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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.