Correlation Between Cadiz Depositary and Kenon Holdings

Can any of the company-specific risk be diversified away by investing in both Cadiz Depositary 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 Cadiz Depositary and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Cadiz Depositary Shares and Kenon Holdings, you can compare the effects of market volatilities on Cadiz Depositary 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 Cadiz Depositary with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadiz Depositary and Kenon Holdings.

Diversification Opportunities for Cadiz Depositary and Kenon Holdings

0.9

Correlation Coefficient

Cadiz Depositary  Kenon Holdings

Almost no diversification

The 3 months correlation between Cadiz and Kenon is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Cadiz Depositary Shares and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and Cadiz Depositary 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 Cadiz Depositary Shares 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 Cadiz Depositary i.e., Cadiz Depositary and Kenon Holdings go up and down completely randomly.

Pair Corralation between Cadiz Depositary and Kenon Holdings

Assuming the 90 days horizon Cadiz Depositary is expected to generate 1.22 times less return on investment than Kenon Holdings. But when comparing it to its historical volatility, Cadiz Depositary Shares is 1.5 times less risky than Kenon Holdings. It trades about 0.19 of its potential returns per unit of risk. Kenon Holdings is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,826  in Kenon Holdings on September 22, 2024 and sell it today you would earn a total of  140.00  from holding Kenon Holdings or generate 4.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Cadiz Depositary Shares  vs.  Kenon Holdings

Cadiz Depositary Shares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Cadiz Depositary Shares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak forward indicators, Cadiz Depositary reported solid returns over the last few months and may actually be approaching a breakup point.

Kenon Holdings

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain technical and fundamental indicators, Kenon Holdings displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Cadiz Depositary and Kenon Holdings

The main advantage of trading using opposite Cadiz Depositary and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadiz Depositary 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 Cadiz Depositary Shares 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.

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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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.