Correlation Between Sun Hung and Hong Kong
Can any of the company-specific risk be diversified away by investing in both Sun Hung 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 Sun Hung and Hong Kong into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sun Hung Kai and Hong Kong and, you can compare the effects of market volatilities on Sun Hung 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 Sun Hung with a short position of Hong Kong. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Hung and Hong Kong.
Diversification Opportunities for Sun Hung and Hong Kong
Significant diversification
The 3 months correlation between Sun and Hong is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Hong Kong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong and Sun Hung 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 Sun Hung Kai 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 Sun Hung i.e., Sun Hung and Hong Kong go up and down completely randomly.
Pair Corralation between Sun Hung and Hong Kong
Assuming the 90 days horizon Sun Hung Kai is expected to generate 0.27 times more return on investment than Hong Kong. However, Sun Hung Kai is 3.77 times less risky than Hong Kong. It trades about -0.24 of its potential returns per unit of risk. Hong Kong and is currently generating about -0.09 per unit of risk. If you would invest 936.00 in Sun Hung Kai on October 21, 2024 and sell it today you would lose (44.00) from holding Sun Hung Kai or give up 4.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sun Hung Kai vs. Hong Kong and
Performance |
| Timeline |
| Sun Hung Kai |
| Hong Kong |
Sun Hung and Hong Kong Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sun Hung and Hong Kong
The main advantage of trading using opposite Sun Hung and Hong Kong positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Hung 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.| Sun Hung vs. Hong Kong Land | Sun Hung vs. Wharf Holdings | Sun Hung vs. Holiday Island Holdings | Sun Hung vs. Bayport International Holdings |
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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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