Correlation Between HK Electric and State Bank

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

Diversification Opportunities for HK Electric and State Bank

0.12

Correlation Coefficient

HK Electric  State Bank

Average diversification

The 3 months correlation between HKT and State is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and State Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on State Bank 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 State Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of State Bank has no effect on the direction of HK Electric i.e., HK Electric and State Bank go up and down completely randomly.

Pair Corralation between HK Electric and State Bank

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 0.45 times more return on investment than State Bank. However, HK Electric Investments is 2.23 times less risky than State Bank. It trades about -0.07 of its potential returns per unit of risk. State Bank of is currently generating about -0.07 per unit of risk. If you would invest  65.00  in HK Electric Investments on December 28, 2024 and sell it today you would lose (2.00) from holding HK Electric Investments or give up 3.08% of portfolio value over 90 days.

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

HK Electric Investments  vs.  State Bank of

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.

State Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days State Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with HK Electric and State Bank

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

The idea behind HK Electric Investments and State Bank of 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.