Correlation Between New World and Hong Kong
Can any of the company-specific risk be diversified away by investing in both New World and Hong Kong 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 Hong Kong 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 Hong Kong and, you can compare the effects of market volatilities on New World and Hong Kong 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 Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Hong Kong.
Diversification Opportunities for New World and Hong Kong
Very weak diversification
The 3 months correlation between New and Hong is 0.46. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Hong Kong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong 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 Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong has no effect on the direction of New World i.e., New World and Hong Kong go up and down completely randomly.
Pair Corralation between New World and Hong Kong
Assuming the 90 days horizon New World Development is expected to under-perform the Hong Kong. In addition to that, New World is 1.44 times more volatile than Hong Kong and. It trades about -0.18 of its total potential returns per unit of risk. Hong Kong and is currently generating about -0.01 per unit of volatility. 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 | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
New World Development vs. Hong Kong and
Performance |
| Timeline |
| New World Development |
| Hong Kong |
New World and Hong Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Hong Kong
The main advantage of trading using opposite New World and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Hong Kong 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 Hong Kong will offset losses from the drop in Hong Kong'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 |
| Hong Kong vs. Henderson Land Development | Hong Kong vs. CLP Holdings | Hong Kong vs. Power Assets Holdings | Hong Kong vs. Hang Lung Properties |
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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.
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