Correlation Between HK Electric and MBANK (BRUSG)

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

Diversification Opportunities for HK Electric and MBANK (BRUSG)

-0.53

Correlation Coefficient

HK Electric  MBANK (BRUSG)

Excellent diversification

The 3 months correlation between HKT and MBANK is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and MBANK in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MBANK (BRUSG) 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 MBANK (BRUSG). Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MBANK (BRUSG) has no effect on the direction of HK Electric i.e., HK Electric and MBANK (BRUSG) go up and down completely randomly.

Pair Corralation between HK Electric and MBANK (BRUSG)

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.21 times more return on investment than MBANK (BRUSG). However, HK Electric is 1.21 times more volatile than MBANK. It trades about 0.1 of its potential returns per unit of risk. MBANK is currently generating about 0.06 per unit of risk. If you would invest  17.00  in HK Electric Investments on October 15, 2024 and sell it today you would earn a total of  48.00  from holding HK Electric Investments or generate 282.35% return on investment over 90 days.

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

HK Electric Investments  vs.  MBANK

HK Electric Investments

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 7 (%) 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.

MBANK (BRUSG)

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days MBANK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with HK Electric and MBANK (BRUSG)

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

The idea behind HK Electric Investments and MBANK 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.