Correlation Between Kenon Holdings and AETNA

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

By analyzing existing cross correlation between Kenon Holdings and AETNA INC 7625, you can compare the effects of market volatilities on Kenon Holdings and AETNA 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 AETNA. Check out your portfolio center. Please also check ongoing floating volatility patterns of Kenon Holdings and AETNA.

Diversification Opportunities for Kenon Holdings and AETNA

-0.28

Correlation Coefficient

Kenon Holdings  AETNA

Very good diversification

The 3 months correlation between Kenon and AETNA is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Kenon Holdings and AETNA INC 7625 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AETNA INC 7625 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 AETNA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AETNA INC 7625 has no effect on the direction of Kenon Holdings i.e., Kenon Holdings and AETNA go up and down completely randomly.

Pair Corralation between Kenon Holdings and AETNA

Considering the 90-day investment horizon Kenon Holdings is expected to generate 0.97 times more return on investment than AETNA. However, Kenon Holdings is 1.04 times less risky than AETNA. It trades about 0.04 of its potential returns per unit of risk. AETNA INC 7625 is currently generating about 0.01 per unit of risk. If you would invest  3,100  in Kenon Holdings on October 10, 2024 and sell it today you would earn a total of  38.00  from holding Kenon Holdings or generate 1.23% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	65.0%
Values	Daily Returns

Kenon Holdings  vs.  AETNA INC 7625

Kenon Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Kenon Holdings are ranked lower than 12 (%) 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.

AETNA INC 7625

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AETNA INC 7625 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, AETNA is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Kenon Holdings and AETNA

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

The idea behind Kenon Holdings and AETNA INC 7625 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.