Correlation Between Hong Kong and Alliance Data
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Alliance Data 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 Alliance Data into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Land and Alliance Data Systems, you can compare the effects of market volatilities on Hong Kong and Alliance Data 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 Alliance Data. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Alliance Data.
Diversification Opportunities for Hong Kong and Alliance Data
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Hong and Alliance is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Alliance Data Systems in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alliance Data Systems 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 Land are associated (or correlated) with Alliance Data. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alliance Data Systems has no effect on the direction of Hong Kong i.e., Hong Kong and Alliance Data go up and down completely randomly.
Pair Corralation between Hong Kong and Alliance Data
Assuming the 90 days trading horizon Hong Kong is expected to generate 18.67 times less return on investment than Alliance Data. But when comparing it to its historical volatility, Hong Kong Land is 25.18 times less risky than Alliance Data. It trades about 0.08 of its potential returns per unit of risk. Alliance Data Systems is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 3,519 in Alliance Data Systems on September 13, 2024 and sell it today you would earn a total of 3,074 from holding Alliance Data Systems or generate 87.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 79.64% |
| Values | Daily Returns |
Hong Kong Land vs. Alliance Data Systems
Performance |
| Timeline |
| Hong Kong Land |
| Alliance Data Systems |
Hong Kong and Alliance Data Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Alliance Data
The main advantage of trading using opposite Hong Kong and Alliance Data positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Alliance Data 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 Alliance Data will offset losses from the drop in Alliance Data's long position.| Hong Kong vs. Jacquet Metal Service | Hong Kong vs. Wyndham Hotels Resorts | Hong Kong vs. InterContinental Hotels Group | Hong Kong vs. AMG Advanced Metallurgical |
| Alliance Data vs. Empire Metals Limited | Alliance Data vs. Cornish Metals | Alliance Data vs. Cairo Communication SpA | Alliance Data vs. Ebro Foods |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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