Correlation Between Consolidated Communications and HK Electric

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

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

Diversification Opportunities for Consolidated Communications and HK Electric

0.84

Correlation Coefficient

Consolidated Communications  HK Electric

Very poor diversification

The 3 months correlation between Consolidated and HKT is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Consolidated Communications Ho 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 Consolidated Communications 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 Consolidated Communications Holdings 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 Consolidated Communications i.e., Consolidated Communications and HK Electric go up and down completely randomly.

Pair Corralation between Consolidated Communications and HK Electric

Assuming the 90 days horizon Consolidated Communications Holdings is expected to generate 0.43 times more return on investment than HK Electric. However, Consolidated Communications Holdings is 2.33 times less risky than HK Electric. It trades about 0.13 of its potential returns per unit of risk. HK Electric Investments is currently generating about 0.01 per unit of risk. If you would invest  442.00  in Consolidated Communications Holdings on September 26, 2024 and sell it today you would earn a total of  6.00  from holding Consolidated Communications Holdings or generate 1.36% return on investment over 90 days.

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

Consolidated Communications Ho  vs.  HK Electric Investments

Consolidated Communications

Risk-Adjusted Performance

14 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Consolidated Communications Holdings are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Consolidated Communications may actually be approaching a critical reversion point that can send shares even higher in January 2025.

HK Electric Investments

Risk-Adjusted Performance

6 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Consolidated Communications and HK Electric

The main advantage of trading using opposite Consolidated Communications and HK Electric positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Consolidated Communications 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 Consolidated Communications Holdings 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.