Correlation Between Hang Lung and Merchants National
Can any of the company-specific risk be diversified away by investing in both Hang Lung and Merchants National 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 Hang Lung and Merchants National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hang Lung Properties and Merchants National Properties, you can compare the effects of market volatilities on Hang Lung and Merchants National 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 Hang Lung with a short position of Merchants National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Lung and Merchants National.
Diversification Opportunities for Hang Lung and Merchants National
0.53 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Hang and Merchants is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Properties and Merchants National Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Merchants National and Hang Lung 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 Hang Lung Properties are associated (or correlated) with Merchants National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Merchants National has no effect on the direction of Hang Lung i.e., Hang Lung and Merchants National go up and down completely randomly.
Pair Corralation between Hang Lung and Merchants National
Assuming the 90 days horizon Hang Lung Properties is expected to generate 4.5 times more return on investment than Merchants National. However, Hang Lung is 4.5 times more volatile than Merchants National Properties. It trades about 0.04 of its potential returns per unit of risk. Merchants National Properties is currently generating about 0.07 per unit of risk. If you would invest 413.00 in Hang Lung Properties on September 1, 2024 and sell it today you would earn a total of 6.00 from holding Hang Lung Properties or generate 1.45% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hang Lung Properties vs. Merchants National Properties
Performance |
| Timeline |
| Hang Lung Properties |
| Merchants National |
Hang Lung and Merchants National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hang Lung and Merchants National
The main advantage of trading using opposite Hang Lung and Merchants National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Lung position performs unexpectedly, Merchants National 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 Merchants National will offset losses from the drop in Merchants National's long position.| Hang Lung vs. IRSA Inversiones Y | Hang Lung vs. Anywhere Real Estate | Hang Lung vs. Newmark Group | Hang Lung vs. New York City |
| Merchants National vs. SM Prime Holdings | Merchants National vs. Mitsubishi Estate Co | Merchants National vs. Daito Trust Construction |
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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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