Correlation Between HK Electric and Corporate Office

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

Diversification Opportunities for HK Electric and Corporate Office

0.59

Correlation Coefficient

HK Electric  Corporate Office

Very weak diversification

The 3 months correlation between HKT and Corporate is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Corporate Office Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Corporate Office Pro 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 Corporate Office. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Corporate Office Pro has no effect on the direction of HK Electric i.e., HK Electric and Corporate Office go up and down completely randomly.

Pair Corralation between HK Electric and Corporate Office

Assuming the 90 days trading horizon HK Electric is expected to generate 1.35 times less return on investment than Corporate Office. But when comparing it to its historical volatility, HK Electric Investments is 1.32 times less risky than Corporate Office. It trades about 0.12 of its potential returns per unit of risk. Corporate Office Properties is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,720  in Corporate Office Properties on September 30, 2024 and sell it today you would earn a total of  240.00  from holding Corporate Office Properties or generate 8.82% return on investment over 90 days.

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

HK Electric Investments  vs.  Corporate Office Properties

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.

Corporate Office Pro

Risk-Adjusted Performance

9 of 100

OK

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

Pair Trading with HK Electric and Corporate Office

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

The idea behind HK Electric Investments and Corporate Office Properties 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.