Correlation Between New World and Sun Hung
Can any of the company-specific risk be diversified away by investing in both New World and Sun Hung 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 Sun Hung 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 Sun Hung Kai, you can compare the effects of market volatilities on New World and Sun Hung 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 Sun Hung. Check out your portfolio center. Please also check ongoing floating volatility patterns of New World and Sun Hung.
Diversification Opportunities for New World and Sun Hung
Very poor diversification
The 3 months correlation between New and Sun is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding New World Development and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai 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 Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of New World i.e., New World and Sun Hung go up and down completely randomly.
Pair Corralation between New World and Sun Hung
Assuming the 90 days horizon New World Development is expected to under-perform the Sun Hung. In addition to that, New World is 4.28 times more volatile than Sun Hung Kai. It trades about -0.18 of its total potential returns per unit of risk. Sun Hung Kai is currently generating about -0.24 per unit of volatility. If you would invest 1,067 in Sun Hung Kai on August 28, 2024 and sell it today you would lose (82.00) from holding Sun Hung Kai or give up 7.69% 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. Sun Hung Kai
Performance |
| Timeline |
| New World Development |
| Sun Hung Kai |
New World and Sun Hung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New World and Sun Hung
The main advantage of trading using opposite New World and Sun Hung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New World position performs unexpectedly, Sun Hung 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 Sun Hung will offset losses from the drop in Sun Hung'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 |
| Sun Hung vs. Hong Kong Land | Sun Hung vs. Wharf Holdings | Sun Hung vs. Holiday Island Holdings | Sun Hung vs. Bayport International Holdings |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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