Correlation Between HK Electric and AGF Management
Can any of the company-specific risk be diversified away by investing in both HK Electric and AGF Management 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 AGF Management 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 AGF Management Limited, you can compare the effects of market volatilities on HK Electric and AGF Management 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 AGF Management. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and AGF Management.
Diversification Opportunities for HK Electric and AGF Management
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and AGF is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and AGF Management Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AGF Management 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 AGF Management. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AGF Management has no effect on the direction of HK Electric i.e., HK Electric and AGF Management go up and down completely randomly.
Pair Corralation between HK Electric and AGF Management
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.79 times more return on investment than AGF Management. However, HK Electric Investments is 1.26 times less risky than AGF Management. It trades about 0.08 of its potential returns per unit of risk. AGF Management Limited is currently generating about -0.08 per unit of risk. If you would invest 63.00 in HK Electric Investments on September 15, 2024 and sell it today you would earn a total of 1.00 from holding HK Electric Investments or generate 1.59% 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. AGF Management Limited
Performance |
| Timeline |
| HK Electric Investments |
| AGF Management |
HK Electric and AGF Management Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and AGF Management
The main advantage of trading using opposite HK Electric and AGF Management positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, AGF Management 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 AGF Management will offset losses from the drop in AGF Management's long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
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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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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