Correlation Between HK Electric and JAPAN AIRLINES
Can any of the company-specific risk be diversified away by investing in both HK Electric and JAPAN AIRLINES 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 JAPAN AIRLINES 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 JAPAN AIRLINES, you can compare the effects of market volatilities on HK Electric and JAPAN AIRLINES 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 JAPAN AIRLINES. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and JAPAN AIRLINES.
Diversification Opportunities for HK Electric and JAPAN AIRLINES
-0.39 | Correlation Coefficient |
Very good diversification
The 3 months correlation between HKT and JAPAN is -0.39. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and JAPAN AIRLINES in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JAPAN AIRLINES 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 JAPAN AIRLINES. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JAPAN AIRLINES has no effect on the direction of HK Electric i.e., HK Electric and JAPAN AIRLINES go up and down completely randomly.
Pair Corralation between HK Electric and JAPAN AIRLINES
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.97 times more return on investment than JAPAN AIRLINES. However, HK Electric is 1.97 times more volatile than JAPAN AIRLINES. It trades about 0.11 of its potential returns per unit of risk. JAPAN AIRLINES is currently generating about -0.02 per unit of risk. If you would invest 41.00 in HK Electric Investments on September 3, 2024 and sell it today you would earn a total of 21.00 from holding HK Electric Investments or generate 51.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. JAPAN AIRLINES
Performance |
| Timeline |
| HK Electric Investments |
| JAPAN AIRLINES |
HK Electric and JAPAN AIRLINES Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and JAPAN AIRLINES
The main advantage of trading using opposite HK Electric and JAPAN AIRLINES positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, JAPAN AIRLINES 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 JAPAN AIRLINES will offset losses from the drop in JAPAN AIRLINES'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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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