Correlation Between HK Electric and Westgold Resources
Can any of the company-specific risk be diversified away by investing in both HK Electric and Westgold Resources 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 HK Electric and Westgold Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and Westgold Resources, you can compare the effects of market volatilities on HK Electric and Westgold Resources 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 HK Electric with a short position of Westgold Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Westgold Resources.
Diversification Opportunities for HK Electric and Westgold Resources
-0.32 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HKT and Westgold is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Westgold Resources in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westgold Resources and HK Electric 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 HK Electric Investments are associated (or correlated) with Westgold Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westgold Resources has no effect on the direction of HK Electric i.e., HK Electric and Westgold Resources go up and down completely randomly.
Pair Corralation between HK Electric and Westgold Resources
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.89 times more return on investment than Westgold Resources. However, HK Electric Investments is 1.12 times less risky than Westgold Resources. It trades about 0.1 of its potential returns per unit of risk. Westgold Resources is currently generating about 0.07 per unit of risk. If you would invest 17.00 in HK Electric Investments on November 5, 2024 and sell it today you would earn a total of 47.00 from holding HK Electric Investments or generate 276.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Westgold Resources
Performance |
| Timeline |
| HK Electric Investments |
| Westgold Resources |
HK Electric and Westgold Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Westgold Resources
The main advantage of trading using opposite HK Electric and Westgold Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Westgold Resources 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 Westgold Resources will offset losses from the drop in Westgold Resources' long position.| HK Electric vs. MPH Health Care | HK Electric vs. Wenzhou Kangning Hospital | HK Electric vs. CanSino Biologics | HK Electric vs. CEOTRONICS |
| Westgold Resources vs. MOUNT GIBSON IRON | Westgold Resources vs. Zoom Video Communications | Westgold Resources vs. TELECOM ITALRISP ADR10 | Westgold Resources vs. INTERNET INJPADR 1 |
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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.
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