Correlation Between HK Electric and Alfen NV
Can any of the company-specific risk be diversified away by investing in both HK Electric and Alfen NV 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 Alfen NV 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 Alfen NV, you can compare the effects of market volatilities on HK Electric and Alfen NV 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 Alfen NV. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Alfen NV.
Diversification Opportunities for HK Electric and Alfen NV
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between HKT and Alfen is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Alfen NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfen NV 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 Alfen NV. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfen NV has no effect on the direction of HK Electric i.e., HK Electric and Alfen NV go up and down completely randomly.
Pair Corralation between HK Electric and Alfen NV
Assuming the 90 days trading horizon HK Electric is expected to generate 1.31 times less return on investment than Alfen NV. But when comparing it to its historical volatility, HK Electric Investments is 4.44 times less risky than Alfen NV. It trades about 0.25 of its potential returns per unit of risk. Alfen NV is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,198 in Alfen NV on October 15, 2024 and sell it today you would earn a total of 40.00 from holding Alfen NV or generate 3.34% 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. Alfen NV
Performance |
| Timeline |
| HK Electric Investments |
| Alfen NV |
HK Electric and Alfen NV Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Alfen NV
The main advantage of trading using opposite HK Electric and Alfen NV positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Alfen NV 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 Alfen NV will offset losses from the drop in Alfen NV's long position.| HK Electric vs. The Japan Steel | HK Electric vs. NEW MILLENNIUM IRON | HK Electric vs. GAMESTOP | HK Electric vs. PENN NATL GAMING |
| Alfen NV vs. Scottish Mortgage Investment | Alfen NV vs. New Residential Investment | Alfen NV vs. HK Electric Investments | Alfen NV vs. WisdomTree Investments |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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