Correlation Between Timken and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both Timken 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 Timken and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Timken Company and Kenon Holdings, you can compare the effects of market volatilities on Timken 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 Timken with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Timken and Kenon Holdings.
Diversification Opportunities for Timken and Kenon Holdings
-0.4 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Timken and Kenon is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Timken Company and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Timken 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 Timken Company 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 Timken i.e., Timken and Kenon Holdings go up and down completely randomly.
Pair Corralation between Timken and Kenon Holdings
Considering the 90-day investment horizon Timken Company is expected to under-perform the Kenon Holdings. In addition to that, Timken is 1.97 times more volatile than Kenon Holdings. It trades about -0.06 of its total potential returns per unit of risk. Kenon Holdings is currently generating about 0.2 per unit of volatility. 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 |
Timken Company vs. Kenon Holdings
Performance |
| Timeline |
| Timken Company |
| Kenon Holdings |
Timken and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Timken and Kenon Holdings
The main advantage of trading using opposite Timken and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Timken 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 Timken Company 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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