Correlation Between EGRNF and Hong Kong

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

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

Diversification Opportunities for EGRNF and Hong Kong

-0.51

Correlation Coefficient

EGRNF  Hong Kong

Excellent diversification

The 3 months correlation between EGRNF and Hong is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding EGRNF and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land and EGRNF 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 EGRNF are associated (or correlated) with Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong Land has no effect on the direction of EGRNF i.e., EGRNF and Hong Kong go up and down completely randomly.

Pair Corralation between EGRNF and Hong Kong

Assuming the 90 days horizon EGRNF is expected to generate 46.04 times more return on investment than Hong Kong. However, EGRNF is 46.04 times more volatile than Hong Kong Land. It trades about 0.09 of its potential returns per unit of risk. Hong Kong Land is currently generating about -0.02 per unit of risk. If you would invest  0.02  in EGRNF on December 1, 2024 and sell it today you would lose (0.01) from holding EGRNF or give up 50.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	96.77%
Values	Daily Returns

EGRNF  vs.  Hong Kong Land

EGRNF

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in EGRNF are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak basic indicators, EGRNF reported solid returns over the last few months and may actually be approaching a breakup point.

Hong Kong Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hong Kong Land has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, Hong Kong is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with EGRNF and Hong Kong

The main advantage of trading using opposite EGRNF and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if EGRNF position performs unexpectedly, Hong Kong 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 Hong Kong will offset losses from the drop in Hong Kong's long position.

The idea behind EGRNF and Hong Kong Land 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.