Correlation Between HK Electric and TOWNSQUARE MEDIA

Can any of the company-specific risk be diversified away by investing in both HK Electric and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA INC, you can compare the effects of market volatilities on HK Electric and TOWNSQUARE MEDIA 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 TOWNSQUARE MEDIA. Check out your portfolio center. Please also check ongoing floating volatility patterns of HK Electric and TOWNSQUARE MEDIA.

Diversification Opportunities for HK Electric and TOWNSQUARE MEDIA

0.08

Correlation Coefficient

HK Electric  TOWNSQUARE MEDIA

Significant diversification

The 3 months correlation between HKT and TOWNSQUARE is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and TOWNSQUARE MEDIA INC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TOWNSQUARE MEDIA INC 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 TOWNSQUARE MEDIA. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TOWNSQUARE MEDIA INC has no effect on the direction of HK Electric i.e., HK Electric and TOWNSQUARE MEDIA go up and down completely randomly.

Pair Corralation between HK Electric and TOWNSQUARE MEDIA

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.31 times more return on investment than TOWNSQUARE MEDIA. However, HK Electric Investments is 3.25 times less risky than TOWNSQUARE MEDIA. It trades about -0.03 of its potential returns per unit of risk. TOWNSQUARE MEDIA INC is currently generating about -0.14 per unit of risk. If you would invest  64.00  in HK Electric Investments on December 22, 2024 and sell it today you would lose (1.00) from holding HK Electric Investments or give up 1.56% of portfolio value over 90 days.

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

HK Electric Investments  vs.  TOWNSQUARE MEDIA INC

HK Electric Investments

Risk-Adjusted Performance

Very Weak

Over the last 90 days HK Electric Investments has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, HK Electric is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

TOWNSQUARE MEDIA INC

Risk-Adjusted Performance

Very Weak

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

Pair Trading with HK Electric and TOWNSQUARE MEDIA

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

The idea behind HK Electric Investments and TOWNSQUARE MEDIA INC 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.