Correlation Between Textron and HK Electric
Can any of the company-specific risk be diversified away by investing in both Textron 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 Textron and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Textron and HK Electric Investments, you can compare the effects of market volatilities on Textron 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 Textron with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Textron and HK Electric.
Diversification Opportunities for Textron and HK Electric
0.28 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Textron and HKT is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Textron 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 Textron 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 Textron 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 Textron i.e., Textron and HK Electric go up and down completely randomly.
Pair Corralation between Textron and HK Electric
Assuming the 90 days horizon Textron is expected to generate 6.64 times less return on investment than HK Electric. But when comparing it to its historical volatility, Textron is 2.0 times less risky than HK Electric. It trades about 0.03 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 17.00 in HK Electric Investments on September 13, 2024 and sell it today you would earn a total of 47.00 from holding HK Electric Investments or generate 276.47% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Textron vs. HK Electric Investments
Performance |
| Timeline |
| Textron |
| HK Electric Investments |
Textron and HK Electric Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Textron and HK Electric
The main advantage of trading using opposite Textron and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Textron 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.| Textron vs. Playa Hotels Resorts | Textron vs. BORR DRILLING NEW | Textron vs. Zijin Mining Group | Textron vs. Evolution Mining Limited |
| 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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