Correlation Between Hong Kong and Moodys

Can any of the company-specific risk be diversified away by investing in both Hong Kong and Moodys 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 Moodys into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Kong Exchange and Moodys, you can compare the effects of market volatilities on Hong Kong and Moodys 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 Moodys. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Moodys.

Diversification Opportunities for Hong Kong and Moodys

0.68

Correlation Coefficient

Hong Kong  Moodys

Poor diversification

The 3 months correlation between Hong and Moodys is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchange and Moodys in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Moodys 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 Exchange are associated (or correlated) with Moodys. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Moodys has no effect on the direction of Hong Kong i.e., Hong Kong and Moodys go up and down completely randomly.

Pair Corralation between Hong Kong and Moodys

Assuming the 90 days horizon Hong Kong is expected to generate 2.19 times less return on investment than Moodys. In addition to that, Hong Kong is 1.9 times more volatile than Moodys. It trades about 0.02 of its total potential returns per unit of risk. Moodys is currently generating about 0.1 per unit of volatility. If you would invest  28,815  in Moodys on December 3, 2024 and sell it today you would earn a total of  21,580  from holding Moodys or generate 74.89% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.6%
Values	Daily Returns

Hong Kong Exchange  vs.  Moodys

Hong Kong Exchange

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Exchange are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

Moodys

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Moodys are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, Moodys is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Hong Kong and Moodys

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

The idea behind Hong Kong Exchange and Moodys 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.