Correlation Between Hang Lung and Swire Pacific
Can any of the company-specific risk be diversified away by investing in both Hang Lung and Swire Pacific 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 Swire Pacific 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 Swire Pacific, you can compare the effects of market volatilities on Hang Lung and Swire Pacific 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 Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Lung and Swire Pacific.
Diversification Opportunities for Hang Lung and Swire Pacific
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Hang and Swire is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Properties and Swire Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific 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 Swire Pacific. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Swire Pacific has no effect on the direction of Hang Lung i.e., Hang Lung and Swire Pacific go up and down completely randomly.
Pair Corralation between Hang Lung and Swire Pacific
Assuming the 90 days horizon Hang Lung Properties is expected to under-perform the Swire Pacific. In addition to that, Hang Lung is 1.28 times more volatile than Swire Pacific. It trades about -0.18 of its total potential returns per unit of risk. Swire Pacific is currently generating about -0.03 per unit of volatility. If you would invest 837.00 in Swire Pacific on August 28, 2024 and sell it today you would lose (11.00) from holding Swire Pacific or give up 1.31% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hang Lung Properties vs. Swire Pacific
Performance |
| Timeline |
| Hang Lung Properties |
| Swire Pacific |
Hang Lung and Swire Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hang Lung and Swire Pacific
The main advantage of trading using opposite Hang Lung and Swire Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Lung position performs unexpectedly, Swire Pacific 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 Swire Pacific will offset losses from the drop in Swire Pacific's long position.| Hang Lung vs. Ascendas India Trust | Hang Lung vs. Asia Pptys | Hang Lung vs. Adler Group SA | Hang Lung vs. Aztec Land Comb |
| Swire Pacific vs. CK Hutchison Holdings | Swire Pacific vs. Marubeni | Swire Pacific vs. Sumitomo Corp ADR | Swire Pacific vs. Marubeni Corp ADR |
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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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