Correlation Between Hong Kong and TMX Group
Can any of the company-specific risk be diversified away by investing in both Hong Kong and TMX Group 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 Hong Kong and TMX Group into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Exchanges and TMX Group Limited, you can compare the effects of market volatilities on Hong Kong and TMX Group 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 Hong Kong with a short position of TMX Group. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and TMX Group.
Diversification Opportunities for Hong Kong and TMX Group
Good diversification
The 3 months correlation between Hong and TMX is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and TMX Group Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TMX Group Limited and Hong Kong 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 Hong Kong Exchanges are associated (or correlated) with TMX Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TMX Group Limited has no effect on the direction of Hong Kong i.e., Hong Kong and TMX Group go up and down completely randomly.
Pair Corralation between Hong Kong and TMX Group
Assuming the 90 days horizon Hong Kong Exchanges is expected to generate 6.18 times more return on investment than TMX Group. However, Hong Kong is 6.18 times more volatile than TMX Group Limited. It trades about 0.08 of its potential returns per unit of risk. TMX Group Limited is currently generating about -0.13 per unit of risk. If you would invest 3,751 in Hong Kong Exchanges on September 26, 2024 and sell it today you would earn a total of 231.00 from holding Hong Kong Exchanges or generate 6.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Hong Kong Exchanges vs. TMX Group Limited
Performance |
Timeline |
Hong Kong Exchanges |
TMX Group Limited |
Hong Kong and TMX Group Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hong Kong and TMX Group
The main advantage of trading using opposite Hong Kong and TMX Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, TMX Group 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 TMX Group will offset losses from the drop in TMX Group's long position.Hong Kong vs. Singapore Exchange Limited | Hong Kong vs. London Stock Exchange | Hong Kong vs. MSCI Inc | Hong Kong vs. London Stock Exchange |
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Check out your portfolio center.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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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