Correlation Between Hung Sheng and China Construction
Can any of the company-specific risk be diversified away by investing in both Hung Sheng and China Construction 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 Hung Sheng and China Construction into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hung Sheng Construction and China Construction Bank, you can compare the effects of market volatilities on Hung Sheng and China Construction 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 Hung Sheng with a short position of China Construction. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hung Sheng and China Construction.
Diversification Opportunities for Hung Sheng and China Construction
0.15 | Correlation Coefficient |
Average diversification
The 3 months correlation between Hung and China is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and China Construction Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Construction Bank and Hung Sheng 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 Hung Sheng Construction are associated (or correlated) with China Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Construction Bank has no effect on the direction of Hung Sheng i.e., Hung Sheng and China Construction go up and down completely randomly.
Pair Corralation between Hung Sheng and China Construction
Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 3.06 times more return on investment than China Construction. However, Hung Sheng is 3.06 times more volatile than China Construction Bank. It trades about 0.09 of its potential returns per unit of risk. China Construction Bank is currently generating about -0.13 per unit of risk. If you would invest 2,615 in Hung Sheng Construction on September 1, 2024 and sell it today you would earn a total of 80.00 from holding Hung Sheng Construction or generate 3.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hung Sheng Construction vs. China Construction Bank
Performance |
| Timeline |
| Hung Sheng Construction |
| China Construction Bank |
Hung Sheng and China Construction Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hung Sheng and China Construction
The main advantage of trading using opposite Hung Sheng and China Construction positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hung Sheng position performs unexpectedly, China Construction 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 China Construction will offset losses from the drop in China Construction's long position.| Hung Sheng vs. Ruentex Development Co | Hung Sheng vs. CTCI Corp | Hung Sheng vs. Information Technology Total | Hung Sheng vs. Ennoconn Corp |
| China Construction vs. Taiwan Semiconductor Manufacturing | China Construction vs. Hon Hai Precision | China Construction vs. MediaTek | China Construction vs. Chunghwa Telecom Co |
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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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