Correlation Between HK Electric and SFC Energy

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

Diversification Opportunities for HK Electric and SFC Energy

0.0

Correlation Coefficient

HK Electric  SFC Energy

Pay attention - limited upside

The 3 months correlation between HKT and SFC is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and SFC Energy AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SFC Energy AG 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 SFC Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SFC Energy AG has no effect on the direction of HK Electric i.e., HK Electric and SFC Energy go up and down completely randomly.

Pair Corralation between HK Electric and SFC Energy

If you would invest (100.00) in SFC Energy AG on December 20, 2024 and sell it today you would earn a total of  100.00  from holding SFC Energy AG or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

HK Electric Investments  vs.  SFC Energy AG

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.

SFC Energy AG

Risk-Adjusted Performance

Solid

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

Pair Trading with HK Electric and SFC Energy

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

The idea behind HK Electric Investments and SFC Energy AG 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.