Correlation Between Hong Kong and SP Global

Can any of the company-specific risk be diversified away by investing in both Hong Kong and SP Global 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 SP Global 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 SP Global, you can compare the effects of market volatilities on Hong Kong and SP Global 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 SP Global. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and SP Global.

Diversification Opportunities for Hong Kong and SP Global

-0.13

Correlation Coefficient

Hong Kong  SP Global

Good diversification

The 3 months correlation between Hong and SPGI is -0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Exchange and SP Global in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SP Global 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 SP Global. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SP Global has no effect on the direction of Hong Kong i.e., Hong Kong and SP Global go up and down completely randomly.

Pair Corralation between Hong Kong and SP Global

Assuming the 90 days horizon Hong Kong Exchange is expected to generate 3.48 times more return on investment than SP Global. However, Hong Kong is 3.48 times more volatile than SP Global. It trades about 0.01 of its potential returns per unit of risk. SP Global is currently generating about -0.2 per unit of risk. If you would invest  3,823  in Hong Kong Exchange on September 22, 2024 and sell it today you would lose (1.00) from holding Hong Kong Exchange or give up 0.03% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.45%
Values	Daily Returns

Hong Kong Exchange  vs.  SP Global

Hong Kong Exchange

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Exchange are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

SP Global

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SP Global has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, SP Global is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Hong Kong and SP Global

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

The idea behind Hong Kong Exchange and SP Global 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.