Correlation Between BOC Hong and Hang Seng
Can any of the company-specific risk be diversified away by investing in both BOC Hong and Hang Seng 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 BOC Hong and Hang Seng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between BOC Hong Kong and Hang Seng Bank, you can compare the effects of market volatilities on BOC Hong and Hang Seng 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 BOC Hong with a short position of Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of BOC Hong and Hang Seng.
Diversification Opportunities for BOC Hong and Hang Seng
Very weak diversification
The 3 months correlation between BOC and Hang is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding BOC Hong Kong and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and BOC Hong 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 BOC Hong Kong are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of BOC Hong i.e., BOC Hong and Hang Seng go up and down completely randomly.
Pair Corralation between BOC Hong and Hang Seng
Assuming the 90 days horizon BOC Hong is expected to generate 1.39 times less return on investment than Hang Seng. But when comparing it to its historical volatility, BOC Hong Kong is 1.07 times less risky than Hang Seng. It trades about 0.12 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest 1,200 in Hang Seng Bank on November 4, 2024 and sell it today you would earn a total of 55.00 from holding Hang Seng Bank or generate 4.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
BOC Hong Kong vs. Hang Seng Bank
Performance |
| Timeline |
| BOC Hong Kong |
| Hang Seng Bank |
BOC Hong and Hang Seng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with BOC Hong and Hang Seng
The main advantage of trading using opposite BOC Hong and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BOC Hong position performs unexpectedly, Hang Seng 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 Hang Seng will offset losses from the drop in Hang Seng's long position.| BOC Hong vs. Bank of the | BOC Hong vs. China Merchants Bank | BOC Hong vs. BDO Unibank ADR | BOC Hong vs. Bangkok Bank PCL |
| Hang Seng vs. Caixabank SA ADR | Hang Seng vs. Commercial International Bank | Hang Seng vs. PT Bank Rakyat | Hang Seng vs. Riverview Bancorp |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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