Correlation Between Kenon Holdings and China Health

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

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

Diversification Opportunities for Kenon Holdings and China Health

-0.44

Correlation Coefficient

Kenon Holdings  China Health

Very good diversification

The 3 months correlation between Kenon and China is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and China Health Industries in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Health Industries and Kenon Holdings 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 Kenon Holdings are associated (or correlated) with China Health. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Health Industries has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and China Health go up and down completely randomly.

Pair Corralation between Kenon Holdings and China Health

Considering the 90-day investment horizon Kenon Holdings is expected to generate 32.21 times less return on investment than China Health. But when comparing it to its historical volatility, Kenon Holdings is 17.94 times less risky than China Health. It trades about 0.04 of its potential returns per unit of risk. China Health Industries is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  11.00  in China Health Industries on October 3, 2024 and sell it today you would earn a total of  17.00  from holding China Health Industries or generate 154.55% return on investment over 90 days.

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

Kenon Holdings  vs.  China Health Industries

Kenon Holdings

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 16 (%) 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.

China Health Industries

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days China Health Industries has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Kenon Holdings and China Health

The main advantage of trading using opposite Kenon Holdings and China Health positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kenon Holdings position performs unexpectedly, China Health 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 China Health will offset losses from the drop in China Health's long position.

The idea behind Kenon Holdings and China Health Industries 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.