Correlation Between SP Global and Hong Kong
Can any of the company-specific risk be diversified away by investing in both SP Global 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 SP Global and Hong Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SP Global and Hong Kong Exchange, you can compare the effects of market volatilities on SP Global 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 SP Global with a short position of Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of SP Global and Hong Kong.
Diversification Opportunities for SP Global and Hong Kong
Modest diversification
The 3 months correlation between SPGI and Hong is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding SP Global 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 SP Global 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 SP Global 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 SP Global i.e., SP Global and Hong Kong go up and down completely randomly.
Pair Corralation between SP Global and Hong Kong
Given the investment horizon of 90 days SP Global is expected to under-perform the Hong Kong. But the stock apears to be less risky and, when comparing its historical volatility, SP Global is 2.27 times less risky than Hong Kong. The stock trades about -0.12 of its potential returns per unit of risk. The Hong Kong Exchange is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 2,908 in Hong Kong Exchange on January 28, 2024 and sell it today you would earn a total of 272.00 from holding Hong Kong Exchange or generate 9.35% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
SP Global vs. Hong Kong Exchange
Performance |
Timeline |
SP Global |
Hong Kong Exchange |
SP Global and Hong Kong Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with SP Global and Hong Kong
The main advantage of trading using opposite SP Global and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SP Global 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.SP Global vs. Dun Bradstreet Holdings | SP Global vs. Intercontinental Exchange | SP Global vs. Nasdaq Inc | SP Global vs. CME Group |
Hong Kong vs. Hong Kong Exchanges | Hong Kong vs. Morningstar | Hong Kong vs. FactSet Research Systems | Hong Kong vs. Intercontinental Exchange |
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 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.
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