Correlation Between Microsoft and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both Microsoft 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 Microsoft and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Microsoft and Kenon Holdings, you can compare the effects of market volatilities on Microsoft 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 Microsoft with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Microsoft and Kenon Holdings.
Diversification Opportunities for Microsoft and Kenon Holdings
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between Microsoft and Kenon is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding Microsoft and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Microsoft 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 Microsoft 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 Microsoft i.e., Microsoft and Kenon Holdings go up and down completely randomly.
Pair Corralation between Microsoft and Kenon Holdings
Given the investment horizon of 90 days Microsoft is expected to under-perform the Kenon Holdings. But the stock apears to be less risky and, when comparing its historical volatility, Microsoft is 1.11 times less risky than Kenon Holdings. The stock trades about -0.04 of its potential returns per unit of risk. The Kenon Holdings is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest 1,044,000 in Kenon Holdings on August 25, 2024 and sell it today you would lose (11,000) from holding Kenon Holdings or give up 1.05% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 77.27% |
| Values | Daily Returns |
Microsoft vs. Kenon Holdings
Performance |
| Timeline |
| Microsoft |
| Kenon Holdings |
Microsoft and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Microsoft and Kenon Holdings
The main advantage of trading using opposite Microsoft and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Microsoft 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.| Microsoft vs. Palo Alto Networks | Microsoft vs. Uipath Inc | Microsoft vs. Block Inc | Microsoft vs. Adobe Systems Incorporated |
| 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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