Correlation Between H World and Hongkong

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

By analyzing existing cross correlation between H World Group and The Hongkong and, you can compare the effects of market volatilities on H World 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 H World with a short position of Hongkong. Check out your portfolio center. Please also check ongoing floating volatility patterns of H World and Hongkong.

Diversification Opportunities for H World and Hongkong

-0.63

Correlation Coefficient

H World  Hongkong

Excellent diversification

The 3 months correlation between CL4A and Hongkong is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding H World Group and The Hongkong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on The Hongkong and H World 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 H World Group 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 H World i.e., H World and Hongkong go up and down completely randomly.

Pair Corralation between H World and Hongkong

Assuming the 90 days trading horizon H World Group is expected to under-perform the Hongkong. But the stock apears to be less risky and, when comparing its historical volatility, H World Group is 1.05 times less risky than Hongkong. The stock trades about -0.06 of its potential returns per unit of risk. The The Hongkong and is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  63.00  in The Hongkong and on October 6, 2024 and sell it today you would earn a total of  12.00  from holding The Hongkong and or generate 19.05% return on investment over 90 days.

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

H World Group  vs.  The Hongkong and

H World Group

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days H World Group has generated negative risk-adjusted returns adding no value to investors with long positions. Despite uncertain performance in the last few months, the Stock's basic indicators remain nearly stable which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

The Hongkong

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Hongkong and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable basic indicators, Hongkong is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with H World and Hongkong

The main advantage of trading using opposite H World and Hongkong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if H World 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.

The idea behind H World Group and The Hongkong and 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.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..