Correlation Between Hong Kong and New World
Can any of the company-specific risk be diversified away by investing in both Hong Kong and New World 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 New World into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hong Kong and and New World Development, you can compare the effects of market volatilities on Hong Kong and New World 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 New World. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and New World.
Diversification Opportunities for Hong Kong and New World
Very weak diversification
The 3 months correlation between Hong and New is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong and and New World Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New World Development 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 and are associated (or correlated) with New World. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New World Development has no effect on the direction of Hong Kong i.e., Hong Kong and New World go up and down completely randomly.
Pair Corralation between Hong Kong and New World
Assuming the 90 days horizon Hong Kong and is expected to generate 0.63 times more return on investment than New World. However, Hong Kong and is 1.59 times less risky than New World. It trades about -0.01 of its potential returns per unit of risk. New World Development is currently generating about -0.14 per unit of risk. If you would invest 71.00 in Hong Kong and on August 25, 2024 and sell it today you would lose (2.00) from holding Hong Kong and or give up 2.82% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong and vs. New World Development
Performance |
| Timeline |
| Hong Kong |
| New World Development |
Hong Kong and New World Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and New World
The main advantage of trading using opposite Hong Kong and New World positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong position performs unexpectedly, New World 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 New World will offset losses from the drop in New World's long position.| Hong Kong vs. NewJersey Resources | Hong Kong vs. Atmos Energy | Hong Kong vs. UGI Corporation | Hong Kong vs. Chesapeake Utilities |
| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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