Correlation Between Hongkong Land and China Overseas
Can any of the company-specific risk be diversified away by investing in both Hongkong Land and China Overseas 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 Hongkong Land and China Overseas into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hongkong Land Holdings and China Overseas Land, you can compare the effects of market volatilities on Hongkong Land and China Overseas 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 Hongkong Land with a short position of China Overseas. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongkong Land and China Overseas.
Diversification Opportunities for Hongkong Land and China Overseas
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hongkong and China is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Hongkong Land Holdings and China Overseas Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Overseas Land and Hongkong Land 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 Hongkong Land Holdings are associated (or correlated) with China Overseas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Overseas Land has no effect on the direction of Hongkong Land i.e., Hongkong Land and China Overseas go up and down completely randomly.
Pair Corralation between Hongkong Land and China Overseas
Assuming the 90 days horizon Hongkong Land Holdings is expected to under-perform the China Overseas. But the stock apears to be less risky and, when comparing its historical volatility, Hongkong Land Holdings is 1.62 times less risky than China Overseas. The stock trades about -0.04 of its potential returns per unit of risk. The China Overseas Land is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 151.00 in China Overseas Land on November 5, 2024 and sell it today you would lose (1.00) from holding China Overseas Land or give up 0.66% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hongkong Land Holdings vs. China Overseas Land
Performance |
| Timeline |
| Hongkong Land Holdings |
| China Overseas Land |
Hongkong Land and China Overseas Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hongkong Land and China Overseas
The main advantage of trading using opposite Hongkong Land and China Overseas positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongkong Land position performs unexpectedly, China Overseas 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 China Overseas will offset losses from the drop in China Overseas' long position.| Hongkong Land vs. China Eastern Airlines | Hongkong Land vs. Nok Airlines PCL | Hongkong Land vs. Southwest Airlines Co | Hongkong Land vs. The Trade Desk |
| China Overseas vs. GAMES OPERATORS SA | China Overseas vs. DETALION GAMES SA | China Overseas vs. CITIC Telecom International | China Overseas vs. Penn National Gaming |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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