Correlation Between Hong Kong and China Vanke
Can any of the company-specific risk be diversified away by investing in both Hong Kong and China Vanke 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 Hong Kong and China Vanke into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong Land and China Vanke Co, you can compare the effects of market volatilities on Hong Kong and China Vanke 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 Hong Kong with a short position of China Vanke. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and China Vanke.
Diversification Opportunities for Hong Kong and China Vanke
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hong and China is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and China Vanke Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Vanke and Hong Kong 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 Hong Kong Land are associated (or correlated) with China Vanke. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Vanke has no effect on the direction of Hong Kong i.e., Hong Kong and China Vanke go up and down completely randomly.
Pair Corralation between Hong Kong and China Vanke
Assuming the 90 days horizon Hong Kong is expected to generate 1.57 times less return on investment than China Vanke. But when comparing it to its historical volatility, Hong Kong Land is 4.43 times less risky than China Vanke. It trades about 0.08 of its potential returns per unit of risk. China Vanke Co is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 51.00 in China Vanke Co on September 4, 2024 and sell it today you would lose (15.00) from holding China Vanke Co or give up 29.41% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong Land vs. China Vanke Co
Performance |
| Timeline |
| Hong Kong Land |
| China Vanke |
Hong Kong and China Vanke Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and China Vanke
The main advantage of trading using opposite Hong Kong and China Vanke positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, China Vanke 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 Vanke will offset losses from the drop in China Vanke's long position.| Hong Kong vs. Wharf Holdings | Hong Kong vs. Holiday Island Holdings | Hong Kong vs. Sun Hung Kai | Hong Kong vs. Bayport International Holdings |
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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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