Correlation Between New World and Hang Lung
Can any of the company-specific risk be diversified away by investing in both New World and Hang Lung 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 New World and Hang Lung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New World Development and Hang Lung Properties, you can compare the effects of market volatilities on New World and Hang Lung 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 New World with a short position of Hang Lung. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Hang Lung.
Diversification Opportunities for New World and Hang Lung
Very poor diversification
The 3 months correlation between New and Hang is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties and New World 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 New World Development are associated (or correlated) with Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of New World i.e., New World and Hang Lung go up and down completely randomly.
Pair Corralation between New World and Hang Lung
Assuming the 90 days horizon New World Development is expected to under-perform the Hang Lung. In addition to that, New World is 2.94 times more volatile than Hang Lung Properties. It trades about -0.18 of its total potential returns per unit of risk. Hang Lung Properties is currently generating about -0.18 per unit of volatility. If you would invest 426.00 in Hang Lung Properties on August 28, 2024 and sell it today you would lose (38.00) from holding Hang Lung Properties or give up 8.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Development vs. Hang Lung Properties
Performance |
| Timeline |
| New World Development |
| Hang Lung Properties |
New World and Hang Lung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Hang Lung
The main advantage of trading using opposite New World and Hang Lung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Hang Lung 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 Hang Lung will offset losses from the drop in Hang Lung's long position.| New World vs. Henderson Land Development | New World vs. Sun Hung Kai | New World vs. Hang Lung Properties | New World vs. Swire Pacific |
| Hang Lung vs. Ascendas India Trust | Hang Lung vs. Asia Pptys | Hang Lung vs. Adler Group SA | Hang Lung vs. Aztec Land Comb |
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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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