Correlation Between HK Electric and FARO Technologies
Can any of the company-specific risk be diversified away by investing in both HK Electric and FARO Technologies 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 FARO Technologies 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 FARO Technologies, you can compare the effects of market volatilities on HK Electric and FARO Technologies 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 FARO Technologies. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and FARO Technologies.
Diversification Opportunities for HK Electric and FARO Technologies
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and FARO is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and FARO Technologies in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FARO Technologies 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 FARO Technologies. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FARO Technologies has no effect on the direction of HK Electric i.e., HK Electric and FARO Technologies go up and down completely randomly.
Pair Corralation between HK Electric and FARO Technologies
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.91 times more return on investment than FARO Technologies. However, HK Electric Investments is 1.1 times less risky than FARO Technologies. It trades about 0.1 of its potential returns per unit of risk. FARO Technologies is currently generating about 0.06 per unit of risk. If you would invest 22.00 in HK Electric Investments on August 31, 2024 and sell it today you would earn a total of 40.00 from holding HK Electric Investments or generate 181.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.74% |
| Values | Daily Returns |
HK Electric Investments vs. FARO Technologies
Performance |
| Timeline |
| HK Electric Investments |
| FARO Technologies |
HK Electric and FARO Technologies Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and FARO Technologies
The main advantage of trading using opposite HK Electric and FARO Technologies positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, FARO Technologies 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 FARO Technologies will offset losses from the drop in FARO Technologies' long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| FARO Technologies vs. Superior Plus Corp | FARO Technologies vs. NMI Holdings | FARO Technologies vs. Origin Agritech | FARO Technologies vs. SIVERS SEMICONDUCTORS AB |
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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.
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