Correlation Between Hong Leong and British American
Can any of the company-specific risk be diversified away by investing in both Hong Leong and British American 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 British American 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 British American Tobacco, you can compare the effects of market volatilities on Hong Leong and British American 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 British American. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and British American.
Diversification Opportunities for Hong Leong and British American
-0.08 | Correlation Coefficient |
Good diversification
The 3 months correlation between Hong and British is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and British American Tobacco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on British American Tobacco 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 British American. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of British American Tobacco has no effect on the direction of Hong Leong i.e., Hong Leong and British American go up and down completely randomly.
Pair Corralation between Hong Leong and British American
Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.58 times more return on investment than British American. However, Hong Leong Bank is 1.72 times less risky than British American. It trades about 0.02 of its potential returns per unit of risk. British American Tobacco is currently generating about -0.04 per unit of risk. If you would invest 1,942 in Hong Leong Bank on September 3, 2024 and sell it today you would earn a total of 126.00 from holding Hong Leong Bank or generate 6.49% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Leong Bank vs. British American Tobacco
Performance |
| Timeline |
| Hong Leong Bank |
| British American Tobacco |
Hong Leong and British American Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Leong and British American
The main advantage of trading using opposite Hong Leong and British American positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Leong position performs unexpectedly, British American 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 British American will offset losses from the drop in British American's long position.| Hong Leong vs. SFP Tech Holdings | Hong Leong vs. Malayan Banking Bhd | Hong Leong vs. Aurelius Technologies Bhd | Hong Leong vs. Alliance Financial Group |
| British American vs. Hong Leong Bank | British American vs. Alliance Financial Group | British American vs. Senheng New Retail | British American vs. Cosmos Technology International |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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