Correlation Between HK Electric and MaxLinear

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

Diversification Opportunities for HK Electric and MaxLinear

0.84

Correlation Coefficient

HK Electric  MaxLinear

Very poor diversification

The 3 months correlation between HKT and MaxLinear is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and MaxLinear in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MaxLinear 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 MaxLinear. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MaxLinear has no effect on the direction of HK Electric i.e., HK Electric and MaxLinear go up and down completely randomly.

Pair Corralation between HK Electric and MaxLinear

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.5 times more return on investment than MaxLinear. However, HK Electric Investments is 1.99 times less risky than MaxLinear. It trades about 0.11 of its potential returns per unit of risk. MaxLinear is currently generating about 0.02 per unit of risk. If you would invest  41.00  in HK Electric Investments on October 12, 2024 and sell it today you would earn a total of  24.00  from holding HK Electric Investments or generate 58.54% return on investment over 90 days.

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

HK Electric Investments  vs.  MaxLinear

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.

MaxLinear

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in MaxLinear are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, MaxLinear reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HK Electric and MaxLinear

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

The idea behind HK Electric Investments and MaxLinear 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..