Correlation Between DOCDATA and HK Electric

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

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

Diversification Opportunities for DOCDATA and HK Electric

-0.84

Correlation Coefficient

DOCDATA  HK Electric

Pay attention - limited upside

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

Pair Corralation between DOCDATA and HK Electric

Assuming the 90 days trading horizon DOCDATA is expected to under-perform the HK Electric. In addition to that, DOCDATA is 4.04 times more volatile than HK Electric Investments. It trades about -0.03 of its total potential returns per unit of risk. HK Electric Investments is currently generating about 0.14 per unit of volatility. If you would invest  62.00  in HK Electric Investments on October 7, 2024 and sell it today you would earn a total of  3.00  from holding HK Electric Investments or generate 4.84% return on investment over 90 days.

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

DOCDATA  vs.  HK Electric Investments

DOCDATA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days DOCDATA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

HK Electric Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with DOCDATA and HK Electric

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

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.