Correlation Between Hongkong Land and Shenzhen Investment
Can any of the company-specific risk be diversified away by investing in both Hongkong Land and Shenzhen Investment 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 Shenzhen Investment 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 Shenzhen Investment Limited, you can compare the effects of market volatilities on Hongkong Land and Shenzhen Investment 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 Shenzhen Investment. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hongkong Land and Shenzhen Investment.
Diversification Opportunities for Hongkong Land and Shenzhen Investment
-0.48 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Hongkong and Shenzhen is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Hongkong Land Holdings and Shenzhen Investment Limited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shenzhen Investment 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 Shenzhen Investment. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shenzhen Investment has no effect on the direction of Hongkong Land i.e., Hongkong Land and Shenzhen Investment go up and down completely randomly.
Pair Corralation between Hongkong Land and Shenzhen Investment
Assuming the 90 days horizon Hongkong Land is expected to generate 1.05 times less return on investment than Shenzhen Investment. But when comparing it to its historical volatility, Hongkong Land Holdings is 2.78 times less risky than Shenzhen Investment. It trades about 0.11 of its potential returns per unit of risk. Shenzhen Investment Limited is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 10.00 in Shenzhen Investment Limited on October 12, 2024 and sell it today you would earn a total of 1.00 from holding Shenzhen Investment Limited or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hongkong Land Holdings vs. Shenzhen Investment Limited
Performance |
| Timeline |
| Hongkong Land Holdings |
| Shenzhen Investment |
Hongkong Land and Shenzhen Investment Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hongkong Land and Shenzhen Investment
The main advantage of trading using opposite Hongkong Land and Shenzhen Investment positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hongkong Land position performs unexpectedly, Shenzhen Investment 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 Shenzhen Investment will offset losses from the drop in Shenzhen Investment's long position.| Hongkong Land vs. Cal Maine Foods | Hongkong Land vs. COFCO Joycome Foods | Hongkong Land vs. Astral Foods Limited | Hongkong Land vs. MTY Food Group |
| Shenzhen Investment vs. Easy Software AG | Shenzhen Investment vs. Tyson Foods | Shenzhen Investment vs. Thai Beverage Public | Shenzhen Investment vs. Take Two Interactive Software |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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