Correlation Between HK Electric and Otis Worldwide
Can any of the company-specific risk be diversified away by investing in both HK Electric and Otis Worldwide 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 Otis Worldwide 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 Otis Worldwide Corp, you can compare the effects of market volatilities on HK Electric and Otis Worldwide 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 Otis Worldwide. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Otis Worldwide.
Diversification Opportunities for HK Electric and Otis Worldwide
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and Otis is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Otis Worldwide Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Otis Worldwide Corp 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 Otis Worldwide. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Otis Worldwide Corp has no effect on the direction of HK Electric i.e., HK Electric and Otis Worldwide go up and down completely randomly.
Pair Corralation between HK Electric and Otis Worldwide
Assuming the 90 days trading horizon HK Electric is expected to generate 1.91 times less return on investment than Otis Worldwide. But when comparing it to its historical volatility, HK Electric Investments is 1.13 times less risky than Otis Worldwide. It trades about 0.0 of its potential returns per unit of risk. Otis Worldwide Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 9,445 in Otis Worldwide Corp on September 12, 2024 and sell it today you would earn a total of 3.00 from holding Otis Worldwide Corp or generate 0.03% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Otis Worldwide Corp
Performance |
| Timeline |
| HK Electric Investments |
| Otis Worldwide Corp |
HK Electric and Otis Worldwide Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Otis Worldwide
The main advantage of trading using opposite HK Electric and Otis Worldwide positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Otis Worldwide 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 Otis Worldwide will offset losses from the drop in Otis Worldwide's long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| Otis Worldwide vs. Astral Foods Limited | Otis Worldwide vs. United Natural Foods | Otis Worldwide vs. HK Electric Investments | Otis Worldwide vs. MOLSON RS BEVERAGE |
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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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