Correlation Between HK Electric and DaVita
Can any of the company-specific risk be diversified away by investing in both HK Electric and DaVita 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 DaVita 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 DaVita Inc, you can compare the effects of market volatilities on HK Electric and DaVita 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 DaVita. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and DaVita.
Diversification Opportunities for HK Electric and DaVita
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and DaVita is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and DaVita Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DaVita Inc 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 DaVita. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DaVita Inc has no effect on the direction of HK Electric i.e., HK Electric and DaVita go up and down completely randomly.
Pair Corralation between HK Electric and DaVita
Assuming the 90 days trading horizon HK Electric is expected to generate 11.69 times less return on investment than DaVita. But when comparing it to its historical volatility, HK Electric Investments is 3.13 times less risky than DaVita. It trades about 0.1 of its potential returns per unit of risk. DaVita Inc is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 12,870 in DaVita Inc on September 5, 2024 and sell it today you would earn a total of 2,655 from holding DaVita Inc or generate 20.63% 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. DaVita Inc
Performance |
| Timeline |
| HK Electric Investments |
| DaVita Inc |
HK Electric and DaVita Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and DaVita
The main advantage of trading using opposite HK Electric and DaVita positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, DaVita 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 DaVita will offset losses from the drop in DaVita's long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| DaVita vs. SEALED AIR | DaVita vs. Gamma Communications plc | DaVita vs. INTERSHOP Communications Aktiengesellschaft | DaVita vs. LAir Liquide SA |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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