Correlation Between Guangdong Investment and HK Electric
Can any of the company-specific risk be diversified away by investing in both Guangdong Investment 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 Guangdong Investment and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Guangdong Investment Limited and HK Electric Investments, you can compare the effects of market volatilities on Guangdong Investment 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 Guangdong Investment with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Guangdong Investment and HK Electric.
Diversification Opportunities for Guangdong Investment and HK Electric
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Guangdong and HKT is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Guangdong Investment Limited 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 Guangdong Investment 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 Guangdong Investment Limited 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 Guangdong Investment i.e., Guangdong Investment and HK Electric go up and down completely randomly.
Pair Corralation between Guangdong Investment and HK Electric
Assuming the 90 days horizon Guangdong Investment Limited is expected to under-perform the HK Electric. In addition to that, Guangdong Investment is 11.4 times more volatile than HK Electric Investments. It trades about -0.13 of its total potential returns per unit of risk. HK Electric Investments is currently generating about -0.24 per unit of volatility. If you would invest 65.00 in HK Electric Investments on October 25, 2024 and sell it today you would lose (1.00) from holding HK Electric Investments or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
Guangdong Investment Limited vs. HK Electric Investments
Performance |
| Timeline |
| Guangdong Investment |
| HK Electric Investments |
Guangdong Investment and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Guangdong Investment and HK Electric
The main advantage of trading using opposite Guangdong Investment and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Guangdong Investment 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.| Guangdong Investment vs. American Water Works | Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Gelsenwasser AG | Guangdong Investment vs. American States Water |
| HK Electric vs. Virtu Financial | HK Electric vs. Ameriprise Financial | HK Electric vs. BOSTON BEER A | HK Electric vs. REVO INSURANCE SPA |
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 Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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