Correlation Between HK Electric and Webster Financial
Can any of the company-specific risk be diversified away by investing in both HK Electric and Webster Financial 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 Webster Financial 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 Webster Financial, you can compare the effects of market volatilities on HK Electric and Webster Financial 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 Webster Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Webster Financial.
Diversification Opportunities for HK Electric and Webster Financial
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between HKT and Webster is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Webster Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Webster Financial 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 Webster Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Webster Financial has no effect on the direction of HK Electric i.e., HK Electric and Webster Financial go up and down completely randomly.
Pair Corralation between HK Electric and Webster Financial
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.48 times more return on investment than Webster Financial. However, HK Electric Investments is 2.08 times less risky than Webster Financial. It trades about 0.11 of its potential returns per unit of risk. Webster Financial is currently generating about -0.08 per unit of risk. If you would invest 62.00 in HK Electric Investments on October 30, 2024 and sell it today you would earn a total of 2.00 from holding HK Electric Investments or generate 3.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
HK Electric Investments vs. Webster Financial
Performance |
| Timeline |
| HK Electric Investments |
| Webster Financial |
HK Electric and Webster Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Webster Financial
The main advantage of trading using opposite HK Electric and Webster Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Webster Financial 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 Webster Financial will offset losses from the drop in Webster Financial's long position.| HK Electric vs. Universal Entertainment | HK Electric vs. COSMOSTEEL HLDGS | HK Electric vs. SOLSTAD OFFSHORE NK | HK Electric vs. PT Global Mediacom |
| Webster Financial vs. SPARTAN STORES | Webster Financial vs. CENTURIA OFFICE REIT | Webster Financial vs. The Home Depot | Webster Financial vs. Geely Automobile Holdings |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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