Correlation Between HK Electric and Vicinity Centres
Can any of the company-specific risk be diversified away by investing in both HK Electric and Vicinity Centres 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 Vicinity Centres 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 Vicinity Centres, you can compare the effects of market volatilities on HK Electric and Vicinity Centres 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 Vicinity Centres. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Vicinity Centres.
Diversification Opportunities for HK Electric and Vicinity Centres
-0.57 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HKT and Vicinity is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Vicinity Centres in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vicinity Centres 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 Vicinity Centres. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vicinity Centres has no effect on the direction of HK Electric i.e., HK Electric and Vicinity Centres go up and down completely randomly.
Pair Corralation between HK Electric and Vicinity Centres
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 2.1 times more return on investment than Vicinity Centres. However, HK Electric is 2.1 times more volatile than Vicinity Centres. It trades about 0.1 of its potential returns per unit of risk. Vicinity Centres is currently generating about 0.04 per unit of risk. If you would invest 21.00 in HK Electric Investments on September 12, 2024 and sell it today you would earn a total of 42.00 from holding HK Electric Investments or generate 200.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Vicinity Centres
Performance |
| Timeline |
| HK Electric Investments |
| Vicinity Centres |
HK Electric and Vicinity Centres Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Vicinity Centres
The main advantage of trading using opposite HK Electric and Vicinity Centres positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Vicinity Centres 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 Vicinity Centres will offset losses from the drop in Vicinity Centres' long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| Vicinity Centres vs. Federal Agricultural Mortgage | Vicinity Centres vs. Tower One Wireless | Vicinity Centres vs. CSSC Offshore Marine | Vicinity Centres vs. Hanison Construction Holdings |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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