Correlation Between Hong Kong and Gas Natural

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

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

Diversification Opportunities for Hong Kong and Gas Natural

-0.07
  Correlation Coefficient
Hong Kong China
Gas Natural Sdg

Good diversification

The 3 months correlation between HOKCF and GASNF is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong China and Gas Natural Sdg in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Gas Natural Sdg 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 China are associated (or correlated) with Gas Natural. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Gas Natural Sdg has no effect on the direction of Hong Kong i.e., Hong Kong and Gas Natural go up and down completely randomly.

Pair Corralation between Hong Kong and Gas Natural

Assuming the 90 days horizon Hong Kong China is expected to generate 12.16 times more return on investment than Gas Natural. However, Hong Kong is 12.16 times more volatile than Gas Natural Sdg. It trades about 0.04 of its potential returns per unit of risk. Gas Natural Sdg is currently generating about 0.02 per unit of risk. If you would invest  195.00  in Hong Kong China on May 1, 2021 and sell it today you would lose (35.00)  from holding Hong Kong China or give up 17.95% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy99.09%
ValuesDaily Returns

Hong Kong China  vs.  Gas Natural Sdg

 Performance (%) 
      Timeline 
Hong Kong China 
 HOKCF Performance
8 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong China are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, Hong Kong exhibited solid returns over the last few months and may actually be approaching a breakup point.

HOKCF Price Channel

Gas Natural Sdg 
 GASNF Performance
5 of 100
Compared to the overall equity markets, risk-adjusted returns on investments in Gas Natural Sdg are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Gas Natural is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

GASNF Price Channel

Hong Kong and Gas Natural Volatility Contrast

 Predicted Return Density 
      Returns 

Pair Trading with Hong Kong and Gas Natural

The main advantage of trading using opposite Hong Kong and Gas Natural positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Gas Natural 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 Gas Natural will offset losses from the drop in Gas Natural's long position.
The idea behind Hong Kong China and Gas Natural Sdg 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.
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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.

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