Correlation Between Hong Kong and Daiwa House
Can any of the company-specific risk be diversified away by investing in both Hong Kong and Daiwa House 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 Daiwa House 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 Daiwa House Industry, you can compare the effects of market volatilities on Hong Kong and Daiwa House 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 Daiwa House. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Daiwa House.
Diversification Opportunities for Hong Kong and Daiwa House
0.24 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Hong and Daiwa is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Daiwa House Industry in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Daiwa House Industry 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 Daiwa House. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Daiwa House Industry has no effect on the direction of Hong Kong i.e., Hong Kong and Daiwa House go up and down completely randomly.
Pair Corralation between Hong Kong and Daiwa House
Assuming the 90 days horizon Hong Kong Land is expected to generate 1.7 times more return on investment than Daiwa House. However, Hong Kong is 1.7 times more volatile than Daiwa House Industry. It trades about 0.07 of its potential returns per unit of risk. Daiwa House Industry is currently generating about 0.03 per unit of risk. If you would invest 1,485 in Hong Kong Land on November 2, 2024 and sell it today you would earn a total of 653.00 from holding Hong Kong Land or generate 43.97% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong Land vs. Daiwa House Industry
Performance |
| Timeline |
| Hong Kong Land |
| Daiwa House Industry |
Hong Kong and Daiwa House Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Daiwa House
The main advantage of trading using opposite Hong Kong and Daiwa House positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, Daiwa House 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 Daiwa House will offset losses from the drop in Daiwa House'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 |
| Daiwa House vs. Sino Land Co | Daiwa House vs. Sun Hung Kai | Daiwa House vs. Holiday Island Holdings | Daiwa House vs. China Overseas Land |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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