Correlation Between HK Electric and H2O Retailing
Can any of the company-specific risk be diversified away by investing in both HK Electric and H2O Retailing 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 H2O Retailing 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 H2O Retailing, you can compare the effects of market volatilities on HK Electric and H2O Retailing 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 H2O Retailing. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and H2O Retailing.
Diversification Opportunities for HK Electric and H2O Retailing
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and H2O is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and H2O Retailing in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on H2O Retailing 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 H2O Retailing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of H2O Retailing has no effect on the direction of HK Electric i.e., HK Electric and H2O Retailing go up and down completely randomly.
Pair Corralation between HK Electric and H2O Retailing
Assuming the 90 days trading horizon HK Electric Investments is expected to under-perform the H2O Retailing. But the stock apears to be less risky and, when comparing its historical volatility, HK Electric Investments is 2.74 times less risky than H2O Retailing. The stock trades about -0.12 of its potential returns per unit of risk. The H2O Retailing is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,350 in H2O Retailing on November 8, 2024 and sell it today you would lose (10.00) from holding H2O Retailing or give up 0.74% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
HK Electric Investments vs. H2O Retailing
Performance |
| Timeline |
| HK Electric Investments |
| H2O Retailing |
HK Electric and H2O Retailing Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and H2O Retailing
The main advantage of trading using opposite HK Electric and H2O Retailing positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, H2O Retailing 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 H2O Retailing will offset losses from the drop in H2O Retailing's long position.| HK Electric vs. US FOODS HOLDING | HK Electric vs. NH Foods | HK Electric vs. SENECA FOODS A | HK Electric vs. USU Software AG |
| H2O Retailing vs. TYSON FOODS A | H2O Retailing vs. China Eastern Airlines | H2O Retailing vs. MONEYSUPERMARKET | H2O Retailing vs. Lifeway Foods |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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