Correlation Between Bank and Hang Seng
Can any of the company-specific risk be diversified away by investing in both Bank and Hang Seng 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 Bank and Hang Seng into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank and Hang Seng Bank, you can compare the effects of market volatilities on Bank and Hang Seng 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 Bank with a short position of Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank and Hang Seng.
Diversification Opportunities for Bank and Hang Seng
Weak diversification
The 3 months correlation between Bank and Hang is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Bank and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and Bank 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 Bank are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of Bank i.e., Bank and Hang Seng go up and down completely randomly.
Pair Corralation between Bank and Hang Seng
Assuming the 90 days horizon Bank is expected to generate 0.7 times more return on investment than Hang Seng. However, Bank is 1.43 times less risky than Hang Seng. It trades about 0.35 of its potential returns per unit of risk. Hang Seng Bank is currently generating about 0.13 per unit of risk. If you would invest 189.00 in Bank on January 26, 2024 and sell it today you would earn a total of 11.00 from holding Bank or generate 5.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 12.9% |
| Values | Daily Returns |
Bank vs. Hang Seng Bank
Performance |
| Timeline |
| Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Strong
| Hang Seng Bank |
Bank and Hang Seng Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank and Hang Seng
The main advantage of trading using opposite Bank and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank position performs unexpectedly, Hang Seng 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 Seng will offset losses from the drop in Hang Seng's long position.| Bank vs. The Coca Cola | Bank vs. Visionary Education Technology | Bank vs. Daily Journal Corp | Bank vs. Skillful Craftsman Education |
| Hang Seng vs. Permanent TSB Group | Hang Seng vs. Japan Post Holdings | Hang Seng vs. Commercial International Bank | Hang Seng vs. Kasikornbank Public Co |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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