Correlation Between Excelsior Medical and Hung Sheng

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Can any of the company-specific risk be diversified away by investing in both Excelsior Medical and Hung Sheng 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 Excelsior Medical and Hung Sheng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Excelsior Medical Co and Hung Sheng Construction, you can compare the effects of market volatilities on Excelsior Medical and Hung Sheng 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 Excelsior Medical with a short position of Hung Sheng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Excelsior Medical and Hung Sheng.

Diversification Opportunities for Excelsior Medical and Hung Sheng

0.28
  Correlation Coefficient

Modest diversification

The 3 months correlation between Excelsior and Hung is 0.28. Overlapping area represents the amount of risk that can be diversified away by holding Excelsior Medical Co and Hung Sheng Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Sheng Construction and Excelsior Medical 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 Excelsior Medical Co are associated (or correlated) with Hung Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Sheng Construction has no effect on the direction of Excelsior Medical i.e., Excelsior Medical and Hung Sheng go up and down completely randomly.

Pair Corralation between Excelsior Medical and Hung Sheng

Assuming the 90 days trading horizon Excelsior Medical Co is expected to under-perform the Hung Sheng. But the stock apears to be less risky and, when comparing its historical volatility, Excelsior Medical Co is 4.94 times less risky than Hung Sheng. The stock trades about -0.05 of its potential returns per unit of risk. The Hung Sheng Construction is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,630  in Hung Sheng Construction on August 28, 2024 and sell it today you would earn a total of  5.00  from holding Hung Sheng Construction or generate 0.19% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Excelsior Medical Co  vs.  Hung Sheng Construction

 Performance 
       Timeline  
Excelsior Medical 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Excelsior Medical Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Excelsior Medical is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.
Hung Sheng Construction 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Hung Sheng Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Hung Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Excelsior Medical and Hung Sheng Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Excelsior Medical and Hung Sheng

The main advantage of trading using opposite Excelsior Medical and Hung Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Excelsior Medical position performs unexpectedly, Hung Sheng 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 Hung Sheng will offset losses from the drop in Hung Sheng's long position.
The idea behind Excelsior Medical Co and Hung Sheng Construction 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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