Correlation Between HK Electric and Royal Bank
Can any of the company-specific risk be diversified away by investing in both HK Electric and Royal Bank 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 Royal Bank 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 Royal Bank of, you can compare the effects of market volatilities on HK Electric and Royal Bank 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 Royal Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Royal Bank.
Diversification Opportunities for HK Electric and Royal Bank
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and Royal is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Royal Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Royal Bank 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 Royal Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Royal Bank has no effect on the direction of HK Electric i.e., HK Electric and Royal Bank go up and down completely randomly.
Pair Corralation between HK Electric and Royal Bank
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 2.65 times more return on investment than Royal Bank. However, HK Electric is 2.65 times more volatile than Royal Bank of. It trades about 0.09 of its potential returns per unit of risk. Royal Bank of is currently generating about 0.07 per unit of risk. If you would invest 17.00 in HK Electric Investments on September 12, 2024 and sell it today you would earn a total of 46.00 from holding HK Electric Investments or generate 270.59% 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. Royal Bank of
Performance |
| Timeline |
| HK Electric Investments |
| Royal Bank |
HK Electric and Royal Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Royal Bank
The main advantage of trading using opposite HK Electric and Royal Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Royal Bank 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 Royal Bank will offset losses from the drop in Royal Bank's long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| Royal Bank vs. Scientific Games | Royal Bank vs. EAST SIDE GAMES | Royal Bank vs. Sunny Optical Technology | Royal Bank vs. GigaMedia |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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