Correlation Between Hong Kong and Bank Hapoalim
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Bank Hapoalim 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 Bank Hapoalim into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Land and Bank Hapoalim ADR, you can compare the effects of market volatilities on Hong Kong and Bank Hapoalim 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 Bank Hapoalim. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Bank Hapoalim.
Diversification Opportunities for Hong Kong and Bank Hapoalim
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hong and Bank is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Bank Hapoalim ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Hapoalim ADR 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 Land are associated (or correlated) with Bank Hapoalim. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Hapoalim ADR has no effect on the direction of Hong Kong i.e., Hong Kong and Bank Hapoalim go up and down completely randomly.
Pair Corralation between Hong Kong and Bank Hapoalim
Assuming the 90 days horizon Hong Kong Land is expected to generate 0.99 times more return on investment than Bank Hapoalim. However, Hong Kong Land is 1.01 times less risky than Bank Hapoalim. It trades about 0.11 of its potential returns per unit of risk. Bank Hapoalim ADR is currently generating about 0.1 per unit of risk. If you would invest 1,706 in Hong Kong Land on September 3, 2024 and sell it today you would earn a total of 570.00 from holding Hong Kong Land or generate 33.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong Land vs. Bank Hapoalim ADR
Performance |
| Timeline |
| Hong Kong Land |
| Bank Hapoalim ADR |
Hong Kong and Bank Hapoalim Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Bank Hapoalim
The main advantage of trading using opposite Hong Kong and Bank Hapoalim positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Bank Hapoalim 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 Bank Hapoalim will offset losses from the drop in Bank Hapoalim's long position.| Hong Kong vs. Wharf Holdings | Hong Kong vs. Holiday Island Holdings | Hong Kong vs. Sun Hung Kai | Hong Kong vs. Bayport International Holdings |
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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 Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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