Correlation Between HK Electric and DNB BANK
Can any of the company-specific risk be diversified away by investing in both HK Electric and DNB BANK 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 DNB BANK 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 DNB BANK ASA, you can compare the effects of market volatilities on HK Electric and DNB BANK 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 DNB BANK. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and DNB BANK.
Diversification Opportunities for HK Electric and DNB BANK
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and DNB is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and DNB BANK ASA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DNB BANK ASA 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 DNB BANK. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DNB BANK ASA has no effect on the direction of HK Electric i.e., HK Electric and DNB BANK go up and down completely randomly.
Pair Corralation between HK Electric and DNB BANK
Assuming the 90 days trading horizon HK Electric is expected to generate 2.77 times less return on investment than DNB BANK. But when comparing it to its historical volatility, HK Electric Investments is 2.69 times less risky than DNB BANK. It trades about 0.1 of its potential returns per unit of risk. DNB BANK ASA is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,861 in DNB BANK ASA on September 1, 2024 and sell it today you would earn a total of 84.00 from holding DNB BANK ASA or generate 4.51% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 95.65% |
Values | Daily Returns |
HK Electric Investments vs. DNB BANK ASA
Performance |
Timeline |
HK Electric Investments |
DNB BANK ASA |
HK Electric and DNB BANK Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with HK Electric and DNB BANK
The main advantage of trading using opposite HK Electric and DNB BANK positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, DNB BANK 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 DNB BANK will offset losses from the drop in DNB BANK'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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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