Correlation Between China Railway and HK Electric
Can any of the company-specific risk be diversified away by investing in both China Railway and HK Electric 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 China Railway and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between China Railway Signal and HK Electric Investments, you can compare the effects of market volatilities on China Railway and HK Electric 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 China Railway with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of China Railway and HK Electric.
Diversification Opportunities for China Railway and HK Electric
0.33 | Correlation Coefficient |
Weak diversification
The 3 months correlation between China and HKT is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding China Railway Signal and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments and China Railway 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 China Railway Signal are associated (or correlated) with HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of China Railway i.e., China Railway and HK Electric go up and down completely randomly.
Pair Corralation between China Railway and HK Electric
Assuming the 90 days horizon China Railway Signal is expected to generate 2.54 times more return on investment than HK Electric. However, China Railway is 2.54 times more volatile than HK Electric Investments. It trades about 0.08 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.09 per unit of risk. If you would invest 4.82 in China Railway Signal on September 14, 2024 and sell it today you would earn a total of 33.18 from holding China Railway Signal or generate 688.38% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 99.8% |
| Values | Daily Returns |
China Railway Signal vs. HK Electric Investments
Performance |
| Timeline |
| China Railway Signal |
| HK Electric Investments |
China Railway and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with China Railway and HK Electric
The main advantage of trading using opposite China Railway and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if China Railway position performs unexpectedly, HK Electric 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 HK Electric will offset losses from the drop in HK Electric's long position.| China Railway vs. Strategic Education | China Railway vs. Hyatt Hotels | China Railway vs. INTERCONT HOTELS | China Railway vs. IDP EDUCATION LTD |
| HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc | HK Electric vs. Apple Inc |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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