Correlation Between Hung Sheng and Da Cin
Can any of the company-specific risk be diversified away by investing in both Hung Sheng and Da Cin 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 Da Cin 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 Da Cin Construction Co, you can compare the effects of market volatilities on Hung Sheng and Da Cin 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 Da Cin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hung Sheng and Da Cin.
Diversification Opportunities for Hung Sheng and Da Cin
-0.25 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hung and 2535 is -0.25. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Da Cin Construction Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Da Cin Construction 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 Da Cin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Da Cin Construction has no effect on the direction of Hung Sheng i.e., Hung Sheng and Da Cin go up and down completely randomly.
Pair Corralation between Hung Sheng and Da Cin
Assuming the 90 days trading horizon Hung Sheng Construction is expected to under-perform the Da Cin. In addition to that, Hung Sheng is 1.48 times more volatile than Da Cin Construction Co. It trades about -0.18 of its total potential returns per unit of risk. Da Cin Construction Co is currently generating about 0.22 per unit of volatility. If you would invest 5,010 in Da Cin Construction Co on November 3, 2024 and sell it today you would earn a total of 490.00 from holding Da Cin Construction Co or generate 9.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hung Sheng Construction vs. Da Cin Construction Co
Performance |
| Timeline |
| Hung Sheng Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Da Cin Construction |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Good
Hung Sheng and Da Cin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hung Sheng and Da Cin
The main advantage of trading using opposite Hung Sheng and Da Cin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hung Sheng position performs unexpectedly, Da Cin 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 Da Cin will offset losses from the drop in Da Cin's long position.The idea behind Hung Sheng Construction and Da Cin Construction Co 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 the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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