Correlation Between HK Electric and BJs Wholesale

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

Diversification Opportunities for HK Electric and BJs Wholesale

0.74

Correlation Coefficient

HK Electric  BJs Wholesale

Poor diversification

The 3 months correlation between HKT and BJs is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and BJs Wholesale Club in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BJs Wholesale Club 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 BJs Wholesale. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BJs Wholesale Club has no effect on the direction of HK Electric i.e., HK Electric and BJs Wholesale go up and down completely randomly.

Pair Corralation between HK Electric and BJs Wholesale

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.78 times more return on investment than BJs Wholesale. However, HK Electric is 1.78 times more volatile than BJs Wholesale Club. It trades about 0.12 of its potential returns per unit of risk. BJs Wholesale Club is currently generating about 0.04 per unit of risk. If you would invest  43.00  in HK Electric Investments on September 23, 2024 and sell it today you would earn a total of  22.00  from holding HK Electric Investments or generate 51.16% return on investment over 90 days.

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

HK Electric Investments  vs.  BJs Wholesale Club

HK Electric Investments

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 6 (%) 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 newest stock price uproar, may contribute to short-horizon losses for the private investors.

BJs Wholesale Club

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in BJs Wholesale Club are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, BJs Wholesale reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HK Electric and BJs Wholesale

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

The idea behind HK Electric Investments and BJs Wholesale Club 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.