Correlation Between HK Electric and Hilltop Holdings
Can any of the company-specific risk be diversified away by investing in both HK Electric and Hilltop Holdings 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 Hilltop Holdings 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 Hilltop Holdings, you can compare the effects of market volatilities on HK Electric and Hilltop Holdings 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 Hilltop Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Hilltop Holdings.
Diversification Opportunities for HK Electric and Hilltop Holdings
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between HKT and Hilltop is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Hilltop Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hilltop Holdings 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 Hilltop Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hilltop Holdings has no effect on the direction of HK Electric i.e., HK Electric and Hilltop Holdings go up and down completely randomly.
Pair Corralation between HK Electric and Hilltop Holdings
Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.7 times more return on investment than Hilltop Holdings. However, HK Electric is 1.7 times more volatile than Hilltop Holdings. It trades about 0.12 of its potential returns per unit of risk. Hilltop Holdings is currently generating about 0.01 per unit of risk. If you would invest 28.00 in HK Electric Investments on September 5, 2024 and sell it today you would earn a total of 35.00 from holding HK Electric Investments or generate 125.0% 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. Hilltop Holdings
Performance |
| Timeline |
| HK Electric Investments |
| Hilltop Holdings |
HK Electric and Hilltop Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with HK Electric and Hilltop Holdings
The main advantage of trading using opposite HK Electric and Hilltop Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Hilltop Holdings 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 Hilltop Holdings will offset losses from the drop in Hilltop Holdings' long position.| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
| Hilltop Holdings vs. Genco Shipping Trading | Hilltop Holdings vs. HK Electric Investments | Hilltop Holdings vs. Chuangs China Investments | Hilltop Holdings vs. SEI INVESTMENTS |
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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.
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