Correlation Between Kenon Holdings and Hongli Group

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

By analyzing existing cross correlation between Kenon Holdings and Hongli Group Ordinary, you can compare the effects of market volatilities on Kenon Holdings and Hongli Group 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 Hongli Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenon Holdings and Hongli Group.

Diversification Opportunities for Kenon Holdings and Hongli Group

-0.53

Correlation Coefficient

Kenon Holdings  Hongli Group

Excellent diversification

The 3 months correlation between Kenon and Hongli is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and Hongli Group Ordinary in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hongli Group Ordinary 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 Hongli Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hongli Group Ordinary has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and Hongli Group go up and down completely randomly.

Pair Corralation between Kenon Holdings and Hongli Group

Considering the 90-day investment horizon Kenon Holdings is expected to generate 1.53 times less return on investment than Hongli Group. But when comparing it to its historical volatility, Kenon Holdings is 3.43 times less risky than Hongli Group. It trades about 0.08 of its potential returns per unit of risk. Hongli Group Ordinary is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  128.00  in Hongli Group Ordinary on September 14, 2024 and sell it today you would earn a total of  8.00  from holding Hongli Group Ordinary or generate 6.25% 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.  Hongli Group Ordinary

Kenon Holdings

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 13 (%) 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.

Hongli Group Ordinary

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hongli Group Ordinary has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's essential indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Kenon Holdings and Hongli Group

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

The idea behind Kenon Holdings and Hongli Group Ordinary 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.