Correlation Between HK Electric and Isetan Mitsukoshi

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

Diversification Opportunities for HK Electric and Isetan Mitsukoshi

0.31

Correlation Coefficient

HK Electric  Isetan Mitsukoshi

Weak diversification

The 3 months correlation between HKT and Isetan is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Isetan Mitsukoshi Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Isetan Mitsukoshi 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 Isetan Mitsukoshi. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Isetan Mitsukoshi has no effect on the direction of HK Electric i.e., HK Electric and Isetan Mitsukoshi go up and down completely randomly.

Pair Corralation between HK Electric and Isetan Mitsukoshi

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.28 times more return on investment than Isetan Mitsukoshi. However, HK Electric Investments is 3.56 times less risky than Isetan Mitsukoshi. It trades about 0.0 of its potential returns per unit of risk. Isetan Mitsukoshi Holdings is currently generating about -0.04 per unit of risk. If you would invest  64.00  in HK Electric Investments on December 19, 2024 and sell it today you would earn a total of  0.00  from holding HK Electric Investments or generate 0.0% return on investment over 90 days.

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

HK Electric Investments  vs.  Isetan Mitsukoshi Holdings

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 current stock price uproar, may contribute to short-horizon losses for the private investors.

Isetan Mitsukoshi

Risk-Adjusted Performance

Very Weak

Over the last 90 days Isetan Mitsukoshi Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HK Electric and Isetan Mitsukoshi

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

The idea behind HK Electric Investments and Isetan Mitsukoshi Holdings 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.