Correlation Between Mastercard Incorporated and HK Electric

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

By analyzing existing cross correlation between Mastercard Incorporated and HK Electric Investments, you can compare the effects of market volatilities on Mastercard Incorporated and HK Electric 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 Mastercard Incorporated with a short position of HK Electric. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mastercard Incorporated and HK Electric.

Diversification Opportunities for Mastercard Incorporated and HK Electric

0.17

Correlation Coefficient

Mastercard Incorporated  HK Electric

Average diversification

The 3 months correlation between Mastercard and HKT is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding Mastercard Incorporated and HK Electric Investments in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HK Electric Investments and Mastercard Incorporated 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 Mastercard Incorporated are associated (or correlated) with HK Electric. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HK Electric Investments has no effect on the direction of Mastercard Incorporated i.e., Mastercard Incorporated and HK Electric go up and down completely randomly.

Pair Corralation between Mastercard Incorporated and HK Electric

Assuming the 90 days trading horizon Mastercard Incorporated is expected to under-perform the HK Electric. But the stock apears to be less risky and, when comparing its historical volatility, Mastercard Incorporated is 1.15 times less risky than HK Electric. The stock trades about -0.01 of its potential returns per unit of risk. The HK Electric Investments is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  63.00  in HK Electric Investments on October 11, 2024 and sell it today you would earn a total of  2.00  from holding HK Electric Investments or generate 3.17% return on investment over 90 days.

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

Mastercard Incorporated  vs.  HK Electric Investments

Mastercard Incorporated

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Mastercard Incorporated are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain forward indicators, Mastercard Incorporated may actually be approaching a critical reversion point that can send shares even higher in February 2025.

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 weak basic indicators, HK Electric may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Mastercard Incorporated and HK Electric

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

The idea behind Mastercard Incorporated and HK Electric Investments 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.