Correlation Between Kenon Holdings and Pampa Energia

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

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

Diversification Opportunities for Kenon Holdings and Pampa Energia

0.84

Correlation Coefficient

Kenon Holdings  Pampa Energia

Very poor diversification

The 3 months correlation between Kenon and Pampa is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and Pampa Energia SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pampa Energia SA 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 Pampa Energia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pampa Energia SA has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and Pampa Energia go up and down completely randomly.

Pair Corralation between Kenon Holdings and Pampa Energia

Considering the 90-day investment horizon Kenon Holdings is expected to generate 2.24 times less return on investment than Pampa Energia. But when comparing it to its historical volatility, Kenon Holdings is 1.09 times less risky than Pampa Energia. It trades about 0.18 of its potential returns per unit of risk. Pampa Energia SA is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  5,486  in Pampa Energia SA on September 2, 2024 and sell it today you would earn a total of  3,073  from holding Pampa Energia SA or generate 56.02% return on investment over 90 days.

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

Kenon Holdings  vs.  Pampa Energia SA

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.

Pampa Energia SA

Risk-Adjusted Performance

29 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Pampa Energia SA are ranked lower than 29 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting basic indicators, Pampa Energia displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Kenon Holdings and Pampa Energia

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

The idea behind Kenon Holdings and Pampa Energia SA 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.