Correlation Between Ford and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both Ford 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 Ford and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ford Motor and Kenon Holdings, you can compare the effects of market volatilities on Ford 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 Ford with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Kenon Holdings.
Diversification Opportunities for Ford and Kenon Holdings
0.39 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Ford and Kenon is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Ford 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 Ford Motor 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 Ford i.e., Ford and Kenon Holdings go up and down completely randomly.
Pair Corralation between Ford and Kenon Holdings
Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.47 times more return on investment than Kenon Holdings. However, Ford is 1.47 times more volatile than Kenon Holdings. It trades about 0.03 of its potential returns per unit of risk. Kenon Holdings is currently generating about -0.02 per unit of risk. If you would invest 1,109 in Ford Motor on August 25, 2024 and sell it today you would earn a total of 9.00 from holding Ford Motor or generate 0.81% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 77.27% |
| Values | Daily Returns |
Ford Motor vs. Kenon Holdings
Performance |
| Timeline |
| Ford Motor |
| Kenon Holdings |
Ford and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ford and Kenon Holdings
The main advantage of trading using opposite Ford and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford 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 Ford Motor 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.| Kenon Holdings vs. ICL Israel Chemicals | Kenon Holdings vs. Tower Semiconductor | Kenon Holdings vs. Israel Corp | Kenon Holdings vs. Nova |
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 CEOs Directory module to screen CEOs from public companies around the world.
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