Correlation Between HK Electric and Guangdong Investment
Can any of the company-specific risk be diversified away by investing in both HK Electric and Guangdong Investment 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 Guangdong Investment 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 Guangdong Investment Limited, you can compare the effects of market volatilities on HK Electric and Guangdong Investment 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 Guangdong Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Guangdong Investment.
Diversification Opportunities for HK Electric and Guangdong Investment
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between HKT and Guangdong is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Guangdong Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Guangdong Investment 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 Guangdong Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Guangdong Investment has no effect on the direction of HK Electric i.e., HK Electric and Guangdong Investment go up and down completely randomly.
Pair Corralation between HK Electric and Guangdong Investment
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.09 times more return on investment than Guangdong Investment. However, HK Electric Investments is 11.4 times less risky than Guangdong Investment. It trades about -0.24 of its potential returns per unit of risk. Guangdong Investment Limited is currently generating about -0.13 per unit of risk. If you would invest 65.00 in HK Electric Investments on October 25, 2024 and sell it today you would lose (1.00) from holding HK Electric Investments or give up 1.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 94.44% |
| Values | Daily Returns |
HK Electric Investments vs. Guangdong Investment Limited
Performance |
| Timeline |
| HK Electric Investments |
| Guangdong Investment |
HK Electric and Guangdong Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Guangdong Investment
The main advantage of trading using opposite HK Electric and Guangdong Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Guangdong Investment 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 Guangdong Investment will offset losses from the drop in Guangdong Investment's long position.| HK Electric vs. Virtu Financial | HK Electric vs. Ameriprise Financial | HK Electric vs. BOSTON BEER A | HK Electric vs. REVO INSURANCE SPA |
| Guangdong Investment vs. American Water Works | Guangdong Investment vs. United Utilities Group | Guangdong Investment vs. Gelsenwasser AG | Guangdong Investment vs. American States Water |
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 Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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