Correlation Between Nike and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both Nike 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 Nike and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nike Inc and Kenon Holdings, you can compare the effects of market volatilities on Nike 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 Nike with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nike and Kenon Holdings.
Diversification Opportunities for Nike and Kenon Holdings
-0.43 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Nike and Kenon is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding Nike Inc and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Nike 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 Nike Inc 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 Nike i.e., Nike and Kenon Holdings go up and down completely randomly.
Pair Corralation between Nike and Kenon Holdings
Considering the 90-day investment horizon Nike is expected to generate 2.92 times less return on investment than Kenon Holdings. But when comparing it to its historical volatility, Nike Inc is 1.19 times less risky than Kenon Holdings. It trades about 0.08 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 2,811 in Kenon Holdings on September 4, 2024 and sell it today you would earn a total of 218.00 from holding Kenon Holdings or generate 7.76% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nike Inc vs. Kenon Holdings
Performance |
| Timeline |
| Nike Inc |
| Kenon Holdings |
Nike and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nike and Kenon Holdings
The main advantage of trading using opposite Nike and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nike 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 Nike Inc 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. 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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