Correlation Between Hong Kong and Ithaca Energy

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

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

Diversification Opportunities for Hong Kong and Ithaca Energy

0.52

Correlation Coefficient

Hong Kong  Ithaca Energy

Very weak diversification

The 3 months correlation between Hong and Ithaca is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Ithaca Energy PLC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Ithaca Energy PLC and Hong Kong 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 Hong Kong Land are associated (or correlated) with Ithaca Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Ithaca Energy PLC has no effect on the direction of Hong Kong i.e., Hong Kong and Ithaca Energy go up and down completely randomly.

Pair Corralation between Hong Kong and Ithaca Energy

Assuming the 90 days trading horizon Hong Kong is expected to generate 18.37 times less return on investment than Ithaca Energy. But when comparing it to its historical volatility, Hong Kong Land is 9.4 times less risky than Ithaca Energy. It trades about 0.12 of its potential returns per unit of risk. Ithaca Energy PLC is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  10,900  in Ithaca Energy PLC on December 30, 2024 and sell it today you would earn a total of  5,460  from holding Ithaca Energy PLC or generate 50.09% return on investment over 90 days.

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

Hong Kong Land  vs.  Ithaca Energy PLC

Hong Kong Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hong Kong is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Ithaca Energy PLC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Ithaca Energy PLC are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain technical and fundamental indicators, Ithaca Energy exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hong Kong and Ithaca Energy

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

The idea behind Hong Kong Land and Ithaca Energy PLC 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.