Correlation Between City Developments and Sun Hung
Can any of the company-specific risk be diversified away by investing in both City Developments 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 City Developments and Sun Hung into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between City Developments Limited and Sun Hung Kai, you can compare the effects of market volatilities on City Developments 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 City Developments with a short position of Sun Hung. Check out your portfolio center. Please also check ongoing floating volatility patterns of City Developments and Sun Hung.
Diversification Opportunities for City Developments and Sun Hung
-0.29 | Correlation Coefficient |
Very good diversification
The 3 months correlation between City and Sun is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding City Developments Limited 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 City Developments 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 City Developments Limited 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 City Developments i.e., City Developments and Sun Hung go up and down completely randomly.
Pair Corralation between City Developments and Sun Hung
Assuming the 90 days horizon City Developments is expected to generate 1.9 times less return on investment than Sun Hung. But when comparing it to its historical volatility, City Developments Limited is 16.58 times less risky than Sun Hung. It trades about 0.21 of its potential returns per unit of risk. Sun Hung Kai is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 901.00 in Sun Hung Kai on January 24, 2024 and sell it today you would earn a total of 11.00 from holding Sun Hung Kai or generate 1.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
City Developments Limited vs. Sun Hung Kai
Performance |
| Timeline |
| City Developments |
| Sun Hung Kai |
City Developments and Sun Hung Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with City Developments and Sun Hung
The main advantage of trading using opposite City Developments and Sun Hung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if City Developments 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.The idea behind City Developments Limited and Sun Hung Kai pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Sun Hung vs. Sino Land Co | Sun Hung vs. Holiday Island Holdings | Sun Hung vs. Daiwa House Industry | Sun Hung vs. China Overseas Land |
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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