Correlation Between ORT and Kenon Holdings
Can any of the company-specific risk be diversified away by investing in both ORT 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 ORT and Kenon Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ORT and Kenon Holdings, you can compare the effects of market volatilities on ORT 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 ORT with a short position of Kenon Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of ORT and Kenon Holdings.
Diversification Opportunities for ORT and Kenon Holdings
0.3 | Correlation Coefficient |
Weak diversification
The 3 months correlation between ORT and Kenon is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding ORT and Kenon Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kenon Holdings and ORT 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 ORT 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 ORT i.e., ORT and Kenon Holdings go up and down completely randomly.
Pair Corralation between ORT and Kenon Holdings
Assuming the 90 days trading horizon ORT is expected to generate 0.52 times more return on investment than Kenon Holdings. However, ORT is 1.92 times less risky than Kenon Holdings. It trades about -0.09 of its potential returns per unit of risk. Kenon Holdings is currently generating about -0.11 per unit of risk. If you would invest 150,000 in ORT on January 26, 2024 and sell it today you would lose (5,300) from holding ORT or give up 3.53% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
ORT vs. Kenon Holdings
Performance |
| Timeline |
| ORT |
| Kenon Holdings |
ORT and Kenon Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ORT and Kenon Holdings
The main advantage of trading using opposite ORT and Kenon Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ORT 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 ORT 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. 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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