Correlation Between Fast Retailing and HK Electric
Can any of the company-specific risk be diversified away by investing in both Fast Retailing and HK Electric 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 Fast Retailing and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fast Retailing Co and HK Electric Investments, you can compare the effects of market volatilities on Fast Retailing and HK Electric 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 Fast Retailing with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fast Retailing and HK Electric.
Diversification Opportunities for Fast Retailing and HK Electric
0.21 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fast and HKT is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Fast Retailing Co and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments and Fast Retailing 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 Fast Retailing Co are associated (or correlated) with HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Fast Retailing i.e., Fast Retailing and HK Electric go up and down completely randomly.
Pair Corralation between Fast Retailing and HK Electric
Assuming the 90 days trading horizon Fast Retailing is expected to generate 3.08 times less return on investment than HK Electric. But when comparing it to its historical volatility, Fast Retailing Co is 1.85 times less risky than HK Electric. It trades about 0.06 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 17.00 in HK Electric Investments on November 7, 2024 and sell it today you would earn a total of 48.00 from holding HK Electric Investments or generate 282.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fast Retailing Co vs. HK Electric Investments
Performance |
| Timeline |
| Fast Retailing |
| HK Electric Investments |
Fast Retailing and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fast Retailing and HK Electric
The main advantage of trading using opposite Fast Retailing and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fast Retailing position performs unexpectedly, HK Electric 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 HK Electric will offset losses from the drop in HK Electric's long position.| Fast Retailing vs. AEON METALS LTD | Fast Retailing vs. IDP EDUCATION LTD | Fast Retailing vs. SIERRA METALS | Fast Retailing vs. Adtalem Global Education |
| HK Electric vs. SK TELECOM TDADR | HK Electric vs. Westinghouse Air Brake | HK Electric vs. Verizon Communications | HK Electric vs. AIR LIQUIDE ADR |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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