Correlation Between IMPERIAL TOBACCO and Hongkong
Can any of the company-specific risk be diversified away by investing in both IMPERIAL TOBACCO and Hongkong 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 IMPERIAL TOBACCO and Hongkong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between IMPERIAL TOBACCO and The Hongkong and, you can compare the effects of market volatilities on IMPERIAL TOBACCO and Hongkong 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 IMPERIAL TOBACCO with a short position of Hongkong. Check out your portfolio center. Please also check ongoing floating volatility patterns of IMPERIAL TOBACCO and Hongkong.
Diversification Opportunities for IMPERIAL TOBACCO and Hongkong
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between IMPERIAL and Hongkong is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding IMPERIAL TOBACCO and The Hongkong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hongkong and IMPERIAL TOBACCO 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 IMPERIAL TOBACCO are associated (or correlated) with Hongkong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of The Hongkong has no effect on the direction of IMPERIAL TOBACCO i.e., IMPERIAL TOBACCO and Hongkong go up and down completely randomly.
Pair Corralation between IMPERIAL TOBACCO and Hongkong
Assuming the 90 days trading horizon IMPERIAL TOBACCO is expected to generate 1.04 times less return on investment than Hongkong. But when comparing it to its historical volatility, IMPERIAL TOBACCO is 2.05 times less risky than Hongkong. It trades about 0.23 of its potential returns per unit of risk. The Hongkong and is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 64.00 in The Hongkong and on October 26, 2024 and sell it today you would earn a total of 9.00 from holding The Hongkong and or generate 14.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.33% |
| Values | Daily Returns |
IMPERIAL TOBACCO vs. The Hongkong and
Performance |
| Timeline |
| IMPERIAL TOBACCO |
| The Hongkong |
IMPERIAL TOBACCO and Hongkong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IMPERIAL TOBACCO and Hongkong
The main advantage of trading using opposite IMPERIAL TOBACCO and Hongkong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IMPERIAL TOBACCO position performs unexpectedly, Hongkong 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 Hongkong will offset losses from the drop in Hongkong's long position.| IMPERIAL TOBACCO vs. Neinor Homes SA | IMPERIAL TOBACCO vs. Taylor Morrison Home | IMPERIAL TOBACCO vs. JD SPORTS FASH | IMPERIAL TOBACCO vs. American Homes 4 |
| Hongkong vs. The Boston Beer | Hongkong vs. S E BANKEN A | Hongkong vs. Chiba Bank | Hongkong vs. Direct Line Insurance |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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