Correlation Between HK Electric and GEELY AUTOMOBILE
Can any of the company-specific risk be diversified away by investing in both HK Electric and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE 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 GEELY AUTOMOBILE, you can compare the effects of market volatilities on HK Electric and GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and GEELY AUTOMOBILE.
Diversification Opportunities for HK Electric and GEELY AUTOMOBILE
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and GEELY is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and GEELY AUTOMOBILE in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on GEELY AUTOMOBILE 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 GEELY AUTOMOBILE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of GEELY AUTOMOBILE has no effect on the direction of HK Electric i.e., HK Electric and GEELY AUTOMOBILE go up and down completely randomly.
Pair Corralation between HK Electric and GEELY AUTOMOBILE
Assuming the 90 days trading horizon HK Electric is expected to generate 3.39 times less return on investment than GEELY AUTOMOBILE. But when comparing it to its historical volatility, HK Electric Investments is 3.74 times less risky than GEELY AUTOMOBILE. It trades about 0.1 of its potential returns per unit of risk. GEELY AUTOMOBILE is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 149.00 in GEELY AUTOMOBILE on October 12, 2024 and sell it today you would earn a total of 22.00 from holding GEELY AUTOMOBILE or generate 14.77% 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. GEELY AUTOMOBILE
Performance |
| Timeline |
| HK Electric Investments |
| GEELY AUTOMOBILE |
HK Electric and GEELY AUTOMOBILE Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and GEELY AUTOMOBILE
The main advantage of trading using opposite HK Electric and GEELY AUTOMOBILE positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, GEELY AUTOMOBILE 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 GEELY AUTOMOBILE will offset losses from the drop in GEELY AUTOMOBILE's long position.| HK Electric vs. GMO Internet | HK Electric vs. Retail Estates NV | HK Electric vs. BURLINGTON STORES | HK Electric vs. Ribbon Communications |
| GEELY AUTOMOBILE vs. HK Electric Investments | GEELY AUTOMOBILE vs. Virtus Investment Partners | GEELY AUTOMOBILE vs. CITY OFFICE REIT | GEELY AUTOMOBILE vs. British American Tobacco |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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