Correlation Between FARO Technologies and HK Electric
Can any of the company-specific risk be diversified away by investing in both FARO Technologies 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 FARO Technologies and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FARO Technologies and HK Electric Investments, you can compare the effects of market volatilities on FARO Technologies 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 FARO Technologies with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of FARO Technologies and HK Electric.
Diversification Opportunities for FARO Technologies and HK Electric
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between FARO and HKT is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding FARO Technologies 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 FARO Technologies 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 FARO Technologies 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 FARO Technologies i.e., FARO Technologies and HK Electric go up and down completely randomly.
Pair Corralation between FARO Technologies and HK Electric
Assuming the 90 days horizon FARO Technologies is expected to generate 5.59 times less return on investment than HK Electric. In addition to that, FARO Technologies is 1.23 times more volatile than HK Electric Investments. It trades about 0.01 of its total potential returns per unit of risk. HK Electric Investments is currently generating about 0.09 per unit of volatility. If you would invest 18.00 in HK Electric Investments on September 2, 2024 and sell it today you would earn a total of 44.00 from holding HK Electric Investments or generate 244.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
FARO Technologies vs. HK Electric Investments
Performance |
| Timeline |
| FARO Technologies |
| HK Electric Investments |
FARO Technologies and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FARO Technologies and HK Electric
The main advantage of trading using opposite FARO Technologies and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FARO Technologies 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.| FARO Technologies vs. MTI WIRELESS EDGE | FARO Technologies vs. Gol Intelligent Airlines | FARO Technologies vs. Gamma Communications plc | FARO Technologies vs. Spirent Communications plc |
| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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