Correlation Between Hong Kong and Euronext
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Euronext 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 Euronext 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 Euronext NV, you can compare the effects of market volatilities on Hong Kong and Euronext 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 Euronext. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Euronext.
Diversification Opportunities for Hong Kong and Euronext
Average diversification
The 3 months correlation between Hong and Euronext is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchanges and Euronext NV in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Euronext NV 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 Euronext. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Euronext NV has no effect on the direction of Hong Kong i.e., Hong Kong and Euronext go up and down completely randomly.
Pair Corralation between Hong Kong and Euronext
Assuming the 90 days horizon Hong Kong Exchanges is expected to generate 4.33 times more return on investment than Euronext. However, Hong Kong is 4.33 times more volatile than Euronext NV. It trades about 0.08 of its potential returns per unit of risk. Euronext NV is currently generating about 0.19 per unit of risk. If you would invest 3,751 in Hong Kong Exchanges on September 25, 2024 and sell it today you would earn a total of 231.00 from holding Hong Kong Exchanges or generate 6.16% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
Hong Kong Exchanges vs. Euronext NV
Performance |
Timeline |
Hong Kong Exchanges |
Euronext NV |
Hong Kong and Euronext Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Hong Kong and Euronext
The main advantage of trading using opposite Hong Kong and Euronext positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Euronext 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 Euronext will offset losses from the drop in Euronext's long position.Hong Kong vs. Singapore Exchange Limited | Hong Kong vs. London Stock Exchange | Hong Kong vs. MSCI Inc | Hong Kong vs. London Stock Exchange |
Euronext vs. Singapore Exchange Limited | Euronext vs. Japan Exchange Group | Euronext vs. TMX Group Limited | Euronext vs. Otc Markets Group |
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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