Correlation Between WEC Energy and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both WEC Energy 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 WEC Energy and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between WEC Energy Group and Kenon Holdings, you can compare the effects of market volatilities on WEC Energy 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 WEC Energy with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of WEC Energy and Kenon Holdings.
Diversification Opportunities for WEC Energy and Kenon Holdings
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between WEC and Kenon is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding WEC Energy Group and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and WEC Energy 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 WEC Energy Group 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 WEC Energy i.e., WEC Energy and Kenon Holdings go up and down completely randomly.
Pair Corralation between WEC Energy and Kenon Holdings
Considering the 90-day investment horizon WEC Energy is expected to generate 1.4 times less return on investment than Kenon Holdings. But when comparing it to its historical volatility, WEC Energy Group is 1.79 times less risky than Kenon Holdings. It trades about 0.24 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 2,780 in Kenon Holdings on August 28, 2024 and sell it today you would earn a total of 206.00 from holding Kenon Holdings or generate 7.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
WEC Energy Group vs. Kenon Holdings
Performance |
| Timeline |
| WEC Energy Group |
| Kenon Holdings |
WEC Energy and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with WEC Energy and Kenon Holdings
The main advantage of trading using opposite WEC Energy and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if WEC Energy 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.| WEC Energy vs. Alliant Energy Corp | WEC Energy vs. CMS Energy | WEC Energy vs. Exelon | WEC Energy vs. Evergy, |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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