Correlation Between Power Assets and Hong Kong

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

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

Diversification Opportunities for Power Assets and Hong Kong

0.27

Correlation Coefficient

Power Assets  Hong Kong

Modest diversification

The 3 months correlation between Power and Hong is 0.27. Overlapping area represents the amount of risk that can be diversified away by holding Power Assets Holdings and Hong Kong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong and Power Assets 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 Power Assets Holdings 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 has no effect on the direction of Power Assets i.e., Power Assets and Hong Kong go up and down completely randomly.

Pair Corralation between Power Assets and Hong Kong

Assuming the 90 days horizon Power Assets Holdings is expected to generate 0.59 times more return on investment than Hong Kong. However, Power Assets Holdings is 1.69 times less risky than Hong Kong. It trades about -0.08 of its potential returns per unit of risk. Hong Kong and is currently generating about -0.06 per unit of risk. If you would invest  687.00  in Power Assets Holdings on October 25, 2024 and sell it today you would lose (28.00) from holding Power Assets Holdings or give up 4.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	94.74%
Values	Daily Returns

Power Assets Holdings  vs.  Hong Kong and

Power Assets Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Power Assets Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong technical and fundamental indicators, Power Assets is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Hong Kong

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Power Assets and Hong Kong

The main advantage of trading using opposite Power Assets and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Power Assets 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 Power Assets Holdings and Hong Kong 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.