Correlation Between REGAL ASIAN and HK Electric

Can any of the company-specific risk be diversified away by investing in both REGAL ASIAN 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 REGAL ASIAN and HK Electric into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between REGAL ASIAN INVESTMENTS and HK Electric Investments, you can compare the effects of market volatilities on REGAL ASIAN 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 REGAL ASIAN with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of REGAL ASIAN and HK Electric.

Diversification Opportunities for REGAL ASIAN and HK Electric

0.39

Correlation Coefficient

REGAL ASIAN  HK Electric

Weak diversification

The 3 months correlation between REGAL and HKT is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding REGAL ASIAN INVESTMENTS 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 REGAL ASIAN 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 REGAL ASIAN INVESTMENTS 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 REGAL ASIAN i.e., REGAL ASIAN and HK Electric go up and down completely randomly.

Pair Corralation between REGAL ASIAN and HK Electric

Assuming the 90 days trading horizon REGAL ASIAN INVESTMENTS is expected to under-perform the HK Electric. In addition to that, REGAL ASIAN is 2.15 times more volatile than HK Electric Investments. It trades about -0.11 of its total potential returns per unit of risk. HK Electric Investments is currently generating about -0.07 per unit of volatility. If you would invest  65.00  in HK Electric Investments on December 28, 2024 and sell it today you would lose (2.00) from holding HK Electric Investments or give up 3.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

REGAL ASIAN INVESTMENTS  vs.  HK Electric Investments

REGAL ASIAN INVESTMENTS

Risk-Adjusted Performance

Very Weak

Over the last 90 days REGAL ASIAN INVESTMENTS has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

HK Electric Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days HK Electric Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with REGAL ASIAN and HK Electric

The main advantage of trading using opposite REGAL ASIAN and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if REGAL ASIAN 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.

The idea behind REGAL ASIAN INVESTMENTS and HK Electric Investments pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Valuation module to check real value of public entities based on technical and fundamental data.