Correlation Between Kenon Holdings and NRG Energy
Can any of the company-specific risk be diversified away by investing in both Kenon Holdings and NRG 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 NRG 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 NRG Energy, you can compare the effects of market volatilities on Kenon Holdings and NRG 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 NRG Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenon Holdings and NRG Energy.
Diversification Opportunities for Kenon Holdings and NRG Energy
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Kenon and NRG is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and NRG Energy in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NRG 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 NRG Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NRG Energy has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and NRG Energy go up and down completely randomly.
Pair Corralation between Kenon Holdings and NRG Energy
Considering the 90-day investment horizon Kenon Holdings is expected to generate 1.62 times less return on investment than NRG Energy. In addition to that, Kenon Holdings is 1.0 times more volatile than NRG Energy. It trades about 0.09 of its total potential returns per unit of risk. NRG Energy is currently generating about 0.15 per unit of volatility. If you would invest 4,675 in NRG Energy on August 26, 2024 and sell it today you would earn a total of 4,873 from holding NRG Energy or generate 104.24% 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. NRG Energy
Performance |
| Timeline |
| Kenon Holdings |
| NRG Energy |
Kenon Holdings and NRG Energy Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Kenon Holdings and NRG Energy
The main advantage of trading using opposite Kenon Holdings and NRG Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenon Holdings position performs unexpectedly, NRG 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 NRG Energy will offset losses from the drop in NRG Energy's long position.| Kenon Holdings vs. Vistra Energy Corp | Kenon Holdings vs. Pampa Energia SA | Kenon Holdings vs. NRG Energy | Kenon Holdings vs. TransAlta Corp |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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