Correlation Between Hong Kong and Swire Pacific
Can any of the company-specific risk be diversified away by investing in both Hong Kong 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 Hong Kong and Swire Pacific 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 Swire Pacific, you can compare the effects of market volatilities on Hong Kong 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 Hong Kong with a short position of Swire Pacific. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Swire Pacific.
Diversification Opportunities for Hong Kong and Swire Pacific
0.07 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Hong and Swire is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong and and Swire Pacific in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Swire Pacific 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 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 Hong Kong i.e., Hong Kong and Swire Pacific go up and down completely randomly.
Pair Corralation between Hong Kong and Swire Pacific
Assuming the 90 days horizon Hong Kong and is expected to generate 2.61 times more return on investment than Swire Pacific. However, Hong Kong is 2.61 times more volatile than Swire Pacific. It trades about -0.01 of its potential returns per unit of risk. Swire Pacific is currently generating about -0.03 per unit of risk. If you would invest 74.00 in Hong Kong and on August 28, 2024 and sell it today you would lose (2.00) from holding Hong Kong and or give up 2.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hong Kong and vs. Swire Pacific
Performance |
| Timeline |
| Hong Kong |
| Swire Pacific |
Hong Kong and Swire Pacific Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hong Kong and Swire Pacific
The main advantage of trading using opposite Hong Kong and Swire Pacific positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hong Kong 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.| Hong Kong vs. Henderson Land Development | Hong Kong vs. CLP Holdings | Hong Kong vs. Power Assets Holdings | Hong Kong vs. Hang Lung Properties |
| 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 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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