Correlation Between Hong Leong and Sanichi Technology
Can any of the company-specific risk be diversified away by investing in both Hong Leong and Sanichi Technology 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 Leong and Sanichi Technology into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Leong Bank and Sanichi Technology Bhd, you can compare the effects of market volatilities on Hong Leong and Sanichi Technology 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 Leong with a short position of Sanichi Technology. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Sanichi Technology.
Diversification Opportunities for Hong Leong and Sanichi Technology
0.08 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hong and Sanichi is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Sanichi Technology Bhd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sanichi Technology Bhd and Hong Leong 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 Leong Bank are associated (or correlated) with Sanichi Technology. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sanichi Technology Bhd has no effect on the direction of Hong Leong i.e., Hong Leong and Sanichi Technology go up and down completely randomly.
Pair Corralation between Hong Leong and Sanichi Technology
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.16 times more return on investment than Sanichi Technology. However, Hong Leong Bank is 6.17 times less risky than Sanichi Technology. It trades about -0.12 of its potential returns per unit of risk. Sanichi Technology Bhd is currently generating about -0.06 per unit of risk. If you would invest 2,044 in Hong Leong Bank on October 16, 2024 and sell it today you would lose (34.00) from holding Hong Leong Bank or give up 1.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. Sanichi Technology Bhd
Performance |
| Timeline |
| Hong Leong Bank |
| Sanichi Technology Bhd |
Hong Leong and Sanichi Technology Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and Sanichi Technology
The main advantage of trading using opposite Hong Leong and Sanichi Technology positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, Sanichi Technology 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 Sanichi Technology will offset losses from the drop in Sanichi Technology's long position.| Hong Leong vs. Systech Bhd | Hong Leong vs. Binasat Communications Bhd | Hong Leong vs. IHH Healthcare Bhd | Hong Leong vs. Tex Cycle Technology |
| Sanichi Technology vs. Malayan Banking Bhd | Sanichi Technology vs. Binasat Communications Bhd | Sanichi Technology vs. Lotte Chemical Titan | Sanichi Technology vs. Hong Leong Bank |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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