Correlation Between Techtronic Industries and Hong Kong

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

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

Diversification Opportunities for Techtronic Industries and Hong Kong

-0.17

Correlation Coefficient

Techtronic Industries  Hong Kong

Good diversification

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

Pair Corralation between Techtronic Industries and Hong Kong

Assuming the 90 days horizon Techtronic Industries is expected to under-perform the Hong Kong. In addition to that, Techtronic Industries is 2.22 times more volatile than Hong Kong Exchange. It trades about -0.04 of its total potential returns per unit of risk. Hong Kong Exchange is currently generating about 0.16 per unit of volatility. If you would invest  3,764  in Hong Kong Exchange on November 29, 2024 and sell it today you would earn a total of  850.00  from holding Hong Kong Exchange or generate 22.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	67.8%
Values	Daily Returns

Techtronic Industries  vs.  Hong Kong Exchange

Techtronic Industries

Risk-Adjusted Performance

Very Weak

Over the last 90 days Techtronic Industries has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in March 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 12 (%) 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.

Pair Trading with Techtronic Industries and Hong Kong

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

The idea behind Techtronic Industries and Hong Kong Exchange 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 Stocks Directory module to find actively traded stocks across global markets.