Correlation Between Hong Kong and DEUTSCHE BOERSE

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

By analyzing existing cross correlation between Hong Kong Exchanges and DEUTSCHE BOERSE ADR, you can compare the effects of market volatilities on Hong Kong and DEUTSCHE BOERSE 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 DEUTSCHE BOERSE. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and DEUTSCHE BOERSE.

Diversification Opportunities for Hong Kong and DEUTSCHE BOERSE

-0.06

Correlation Coefficient

Hong Kong  DEUTSCHE BOERSE

Good diversification

The 3 months correlation between Hong and DEUTSCHE is -0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and DEUTSCHE BOERSE ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on DEUTSCHE BOERSE ADR 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 Exchanges are associated (or correlated) with DEUTSCHE BOERSE. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of DEUTSCHE BOERSE ADR has no effect on the direction of Hong Kong i.e., Hong Kong and DEUTSCHE BOERSE go up and down completely randomly.

Pair Corralation between Hong Kong and DEUTSCHE BOERSE

Assuming the 90 days trading horizon Hong Kong is expected to generate 1.22 times less return on investment than DEUTSCHE BOERSE. In addition to that, Hong Kong is 3.53 times more volatile than DEUTSCHE BOERSE ADR. It trades about 0.03 of its total potential returns per unit of risk. DEUTSCHE BOERSE ADR is currently generating about 0.12 per unit of volatility. If you would invest  2,060  in DEUTSCHE BOERSE ADR on September 27, 2024 and sell it today you would earn a total of  160.00  from holding DEUTSCHE BOERSE ADR or generate 7.77% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hong Kong Exchanges  vs.  DEUTSCHE BOERSE ADR

Hong Kong Exchanges

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Exchanges are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hong Kong may actually be approaching a critical reversion point that can send shares even higher in January 2025.

DEUTSCHE BOERSE ADR

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in DEUTSCHE BOERSE ADR are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile fundamental indicators, DEUTSCHE BOERSE may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hong Kong and DEUTSCHE BOERSE

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

The idea behind Hong Kong Exchanges and DEUTSCHE BOERSE ADR 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..