Correlation Between Hang Seng and China Resources
Can any of the company-specific risk be diversified away by investing in both Hang Seng and China Resources 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 Seng and China Resources into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hang Seng Bank and China Resources Land, you can compare the effects of market volatilities on Hang Seng and China Resources 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 Seng with a short position of China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Seng and China Resources.
Diversification Opportunities for Hang Seng and China Resources
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Hang and China is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Hang Seng Bank and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land and Hang Seng 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 Seng Bank are associated (or correlated) with China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of Hang Seng i.e., Hang Seng and China Resources go up and down completely randomly.
Pair Corralation between Hang Seng and China Resources
Assuming the 90 days horizon Hang Seng is expected to generate 1.19 times less return on investment than China Resources. But when comparing it to its historical volatility, Hang Seng Bank is 1.72 times less risky than China Resources. It trades about 0.07 of its potential returns per unit of risk. China Resources Land is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 136.00 in China Resources Land on September 3, 2024 and sell it today you would earn a total of 136.00 from holding China Resources Land or generate 100.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Hang Seng Bank vs. China Resources Land
Performance |
| Timeline |
| Hang Seng Bank |
| China Resources Land |
Hang Seng and China Resources Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Hang Seng and China Resources
The main advantage of trading using opposite Hang Seng and China Resources positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hang Seng position performs unexpectedly, China Resources 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 Resources will offset losses from the drop in China Resources' long position.| Hang Seng vs. Aegean Airlines SA | Hang Seng vs. Warner Music Group | Hang Seng vs. Tencent Music Entertainment | Hang Seng vs. AEGEAN AIRLINES |
| China Resources vs. QURATE RETAIL INC | China Resources vs. SPARTAN STORES | China Resources vs. FAST RETAIL ADR | China Resources vs. Computer And Technologies |
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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