Correlation Between Hong Kong and Intercontinental
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Intercontinental 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 Hong Kong and Intercontinental into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Exchanges and Intercontinental Exchange, you can compare the effects of market volatilities on Hong Kong and Intercontinental 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 Hong Kong with a short position of Intercontinental. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Intercontinental.
Diversification Opportunities for Hong Kong and Intercontinental
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hong and Intercontinental is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and Intercontinental Exchange in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intercontinental Exchange and Hong Kong 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 Hong Kong Exchanges are associated (or correlated) with Intercontinental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intercontinental Exchange has no effect on the direction of Hong Kong i.e., Hong Kong and Intercontinental go up and down completely randomly.
Pair Corralation between Hong Kong and Intercontinental
Assuming the 90 days trading horizon Hong Kong Exchanges is expected to under-perform the Intercontinental. But the stock apears to be less risky and, when comparing its historical volatility, Hong Kong Exchanges is 1.2 times less risky than Intercontinental. The stock trades about -0.17 of its potential returns per unit of risk. The Intercontinental Exchange is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 14,386 in Intercontinental Exchange on October 21, 2024 and sell it today you would earn a total of 138.00 from holding Intercontinental Exchange or generate 0.96% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong Exchanges vs. Intercontinental Exchange
Performance |
| Timeline |
| Hong Kong Exchanges |
| Intercontinental Exchange |
Hong Kong and Intercontinental Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Intercontinental
The main advantage of trading using opposite Hong Kong and Intercontinental positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Intercontinental 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 Intercontinental will offset losses from the drop in Intercontinental's long position.| Hong Kong vs. CME Group | Hong Kong vs. Intercontinental Exchange | Hong Kong vs. London Stock Exchange | Hong Kong vs. Deutsche Brse AG |
| Intercontinental vs. CME Group | Intercontinental vs. Hong Kong Exchanges | Intercontinental vs. London Stock Exchange | Intercontinental vs. Deutsche Brse AG |
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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