Correlation Between HK Electric and Scottish Mortgage

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Can any of the company-specific risk be diversified away by investing in both HK Electric and Scottish Mortgage 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 HK Electric and Scottish Mortgage into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between HK Electric Investments and Scottish Mortgage Investment, you can compare the effects of market volatilities on HK Electric and Scottish Mortgage 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 HK Electric with a short position of Scottish Mortgage. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and Scottish Mortgage.

Diversification Opportunities for HK Electric and Scottish Mortgage

0.78
  Correlation Coefficient

Poor diversification

The 3 months correlation between HKT and Scottish is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Scottish Mortgage Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Scottish Mortgage and HK Electric 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 HK Electric Investments are associated (or correlated) with Scottish Mortgage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Scottish Mortgage has no effect on the direction of HK Electric i.e., HK Electric and Scottish Mortgage go up and down completely randomly.

Pair Corralation between HK Electric and Scottish Mortgage

Assuming the 90 days trading horizon HK Electric is expected to generate 5.53 times less return on investment than Scottish Mortgage. But when comparing it to its historical volatility, HK Electric Investments is 1.24 times less risky than Scottish Mortgage. It trades about 0.07 of its potential returns per unit of risk. Scottish Mortgage Investment is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest  1,023  in Scottish Mortgage Investment on October 24, 2024 and sell it today you would earn a total of  207.00  from holding Scottish Mortgage Investment or generate 20.23% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

HK Electric Investments  vs.  Scottish Mortgage Investment

 Performance 
       Timeline  
HK Electric Investments 

Risk-Adjusted Performance

5 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.
Scottish Mortgage 

Risk-Adjusted Performance

22 of 100

 
Weak
 
Strong
Solid
Compared to the overall equity markets, risk-adjusted returns on investments in Scottish Mortgage Investment are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Scottish Mortgage reported solid returns over the last few months and may actually be approaching a breakup point.

HK Electric and Scottish Mortgage Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with HK Electric and Scottish Mortgage

The main advantage of trading using opposite HK Electric and Scottish Mortgage positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if HK Electric position performs unexpectedly, Scottish Mortgage 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 Scottish Mortgage will offset losses from the drop in Scottish Mortgage's long position.
The idea behind HK Electric Investments and Scottish Mortgage Investment 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.

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