Correlation Between HK Electric and Textron
Can any of the company-specific risk be diversified away by investing in both HK Electric and Textron 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 Textron 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 Textron, you can compare the effects of market volatilities on HK Electric and Textron 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 Textron. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Textron.
Diversification Opportunities for HK Electric and Textron
-0.54 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between HKT and Textron is -0.54. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Textron in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Textron 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 Textron. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Textron has no effect on the direction of HK Electric i.e., HK Electric and Textron go up and down completely randomly.
Pair Corralation between HK Electric and Textron
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 2.07 times more return on investment than Textron. However, HK Electric is 2.07 times more volatile than Textron. It trades about 0.1 of its potential returns per unit of risk. Textron is currently generating about -0.02 per unit of risk. If you would invest 46.00 in HK Electric Investments on November 3, 2024 and sell it today you would earn a total of 18.00 from holding HK Electric Investments or generate 39.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Textron
Performance |
| Timeline |
| HK Electric Investments |
| Textron |
HK Electric and Textron Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Textron
The main advantage of trading using opposite HK Electric and Textron positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Textron 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 Textron will offset losses from the drop in Textron's long position.| HK Electric vs. SIVERS SEMICONDUCTORS AB | HK Electric vs. NorAm Drilling AS | HK Electric vs. Volkswagen AG | HK Electric vs. Darden Restaurants |
| Textron vs. AEGEAN AIRLINES | Textron vs. PENN Entertainment | Textron vs. Live Nation Entertainment | Textron vs. Townsquare Media |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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