Correlation Between HK Electric and Intel

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

Diversification Opportunities for HK Electric and Intel

0.03

Correlation Coefficient

HK Electric  Intel

Significant diversification

The 3 months correlation between HKT and Intel is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Intel in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Intel 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 Intel. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Intel has no effect on the direction of HK Electric i.e., HK Electric and Intel go up and down completely randomly.

Pair Corralation between HK Electric and Intel

Assuming the 90 days trading horizon HK Electric is expected to generate 120.18 times less return on investment than Intel. But when comparing it to its historical volatility, HK Electric Investments is 5.91 times less risky than Intel. It trades about 0.0 of its potential returns per unit of risk. Intel is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,918  in Intel on December 21, 2024 and sell it today you would earn a total of  289.00  from holding Intel or generate 15.07% return on investment over 90 days.

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

HK Electric Investments  vs.  Intel

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.

Intel

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Intel are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain essential indicators, Intel unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HK Electric and Intel

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

The idea behind HK Electric Investments and Intel 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.