Correlation Between Hawaiian Holdings and Hong Kong

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

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

Diversification Opportunities for Hawaiian Holdings and Hong Kong

0.86

Correlation Coefficient

Hawaiian Holdings  Hong Kong

Very poor diversification

The 3 months correlation between Hawaiian and Hong is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Hawaiian Holdings and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land and Hawaiian Holdings 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 Hawaiian Holdings 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 Land has no effect on the direction of Hawaiian Holdings i.e., Hawaiian Holdings and Hong Kong go up and down completely randomly.

Pair Corralation between Hawaiian Holdings and Hong Kong

Allowing for the 90-day total investment horizon Hawaiian Holdings is expected to generate 1.12 times less return on investment than Hong Kong. But when comparing it to its historical volatility, Hawaiian Holdings is 2.0 times less risky than Hong Kong. It trades about 0.21 of its potential returns per unit of risk. Hong Kong Land is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,791  in Hong Kong Land on September 4, 2024 and sell it today you would earn a total of  406.00  from holding Hong Kong Land or generate 22.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	17.19%
Values	Daily Returns

Hawaiian Holdings  vs.  Hong Kong Land

Hawaiian Holdings

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Hawaiian Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat abnormal basic indicators, Hawaiian Holdings sustained solid returns over the last few months and may actually be approaching a breakup point.

Hong Kong Land

Risk-Adjusted Performance

9 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hawaiian Holdings and Hong Kong

The main advantage of trading using opposite Hawaiian Holdings and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hawaiian Holdings 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 Hawaiian Holdings and Hong Kong Land 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 Commodity Directory module to find actively traded commodities issued by global exchanges.