Correlation Between HK Electric and Apple

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

Diversification Opportunities for HK Electric and Apple

0.55

Correlation Coefficient

HK Electric  Apple

Very weak diversification

The 3 months correlation between HKT and Apple is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding HK Electric Investments and Apple Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Apple Inc 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 Apple. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Apple Inc has no effect on the direction of HK Electric i.e., HK Electric and Apple go up and down completely randomly.

Pair Corralation between HK Electric and Apple

Assuming the 90 days trading horizon HK Electric Investments is expected to generate 2.9 times more return on investment than Apple. However, HK Electric is 2.9 times more volatile than Apple Inc. It trades about 0.14 of its potential returns per unit of risk. Apple Inc is currently generating about 0.13 per unit of risk. If you would invest  40.00  in HK Electric Investments on March 5, 2024 and sell it today you would earn a total of  16.00  from holding HK Electric Investments or generate 40.0% 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.  Apple Inc

HK Electric Investments

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in HK Electric Investments are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, HK Electric unveiled solid returns over the last few months and may actually be approaching a breakup point.

Apple Inc

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Apple Inc are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively fragile fundamental indicators, Apple may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Pair Trading with HK Electric and Apple

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

The idea behind HK Electric Investments and Apple Inc 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.