Correlation Between Hong Kong and Japan Exchange
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Japan Exchange 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 Hong Kong and Japan Exchange into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Exchanges and Japan Exchange Group, you can compare the effects of market volatilities on Hong Kong and Japan Exchange 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 Hong Kong with a short position of Japan Exchange. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Japan Exchange.
Diversification Opportunities for Hong Kong and Japan Exchange
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hong and Japan is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and Japan Exchange Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Japan Exchange Group and Hong Kong 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 Hong Kong Exchanges are associated (or correlated) with Japan Exchange. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Japan Exchange Group has no effect on the direction of Hong Kong i.e., Hong Kong and Japan Exchange go up and down completely randomly.
Pair Corralation between Hong Kong and Japan Exchange
Assuming the 90 days horizon Hong Kong Exchanges is expected to under-perform the Japan Exchange. In addition to that, Hong Kong is 1.9 times more volatile than Japan Exchange Group. It trades about -0.09 of its total potential returns per unit of risk. Japan Exchange Group is currently generating about 0.06 per unit of volatility. If you would invest 1,145 in Japan Exchange Group on August 24, 2024 and sell it today you would earn a total of 24.00 from holding Japan Exchange Group or generate 2.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong Exchanges vs. Japan Exchange Group
Performance |
| Timeline |
| Hong Kong Exchanges |
| Japan Exchange Group |
Hong Kong and Japan Exchange Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Japan Exchange
The main advantage of trading using opposite Hong Kong and Japan Exchange positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Japan Exchange 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 Japan Exchange will offset losses from the drop in Japan Exchange's long position.| Hong Kong vs. Singapore Exchange Limited | Hong Kong vs. London Stock Exchange | Hong Kong vs. MSCI Inc | Hong Kong vs. London Stock Exchange |
| Japan Exchange vs. Euronext NV | Japan Exchange vs. Singapore Exchange Limited | Japan Exchange vs. TMX Group Limited | Japan Exchange vs. Otc Markets Group |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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