Correlation Between Hong Kong and Value Line
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Value Line 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 Value Line 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 Value Line, you can compare the effects of market volatilities on Hong Kong and Value Line 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 Value Line. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Value Line.
Diversification Opportunities for Hong Kong and Value Line
0.35 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Hong and Value is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchange and Value Line in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Value Line 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 Value Line. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Value Line has no effect on the direction of Hong Kong i.e., Hong Kong and Value Line go up and down completely randomly.
Pair Corralation between Hong Kong and Value Line
Assuming the 90 days horizon Hong Kong Exchange is expected to generate 1.07 times more return on investment than Value Line. However, Hong Kong is 1.07 times more volatile than Value Line. It trades about -0.12 of its potential returns per unit of risk. Value Line is currently generating about -0.21 per unit of risk. If you would invest 3,056 in Hong Kong Exchange on January 20, 2024 and sell it today you would lose (269.00) from holding Hong Kong Exchange or give up 8.8% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 97.67% |
| Values | Daily Returns |
Hong Kong Exchange vs. Value Line
Performance |
| Timeline |
| Hong Kong Exchange |
| Value Line |
Hong Kong and Value Line Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Value Line
The main advantage of trading using opposite Hong Kong and Value Line positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Value Line 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 Value Line will offset losses from the drop in Value Line's long position.The idea behind Hong Kong Exchange and Value Line 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.| Value Line vs. Dun Bradstreet Holdings | Value Line vs. FactSet Research Systems | Value Line vs. Moodys | Value Line vs. MSCI Inc |
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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.
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