Correlation Between HK Electric and AURUBIS AG

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

Diversification Opportunities for HK Electric and AURUBIS AG

0.7

Correlation Coefficient

HK Electric  AURUBIS AG

Poor diversification

The 3 months correlation between HKT and AURUBIS is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and AURUBIS AG UNSPADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AURUBIS AG UNSPADR 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 AURUBIS AG. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AURUBIS AG UNSPADR has no effect on the direction of HK Electric i.e., HK Electric and AURUBIS AG go up and down completely randomly.

Pair Corralation between HK Electric and AURUBIS AG

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 1.0 times more return on investment than AURUBIS AG. However, HK Electric is 1.0 times more volatile than AURUBIS AG UNSPADR. It trades about 0.1 of its potential returns per unit of risk. AURUBIS AG UNSPADR is currently generating about 0.01 per unit of risk. If you would invest  17.00  in HK Electric Investments on September 29, 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 Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

HK Electric Investments  vs.  AURUBIS AG UNSPADR

HK Electric Investments

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in January 2025.

AURUBIS AG UNSPADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in AURUBIS AG UNSPADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain basic indicators, AURUBIS AG reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with HK Electric and AURUBIS AG

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

The idea behind HK Electric Investments and AURUBIS AG UNSPADR 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.