Correlation Between Ford and Hang Lung

Can any of the company-specific risk be diversified away by investing in both Ford and Hang Lung 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 Ford and Hang Lung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Ford Motor and Hang Lung Properties, you can compare the effects of market volatilities on Ford and Hang Lung 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 Ford with a short position of Hang Lung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ford and Hang Lung.

Diversification Opportunities for Ford and Hang Lung

-0.82

Correlation Coefficient

Ford  Hang Lung

Pay attention - limited upside

The 3 months correlation between Ford and Hang is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding Ford Motor and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties and Ford 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 Ford Motor are associated (or correlated) with Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of Ford i.e., Ford and Hang Lung go up and down completely randomly.

Pair Corralation between Ford and Hang Lung

Taking into account the 90-day investment horizon Ford Motor is expected to generate 1.18 times more return on investment than Hang Lung. However, Ford is 1.18 times more volatile than Hang Lung Properties. It trades about 0.01 of its potential returns per unit of risk. Hang Lung Properties is currently generating about -0.03 per unit of risk. If you would invest  1,294  in Ford Motor on January 24, 2024 and sell it today you would earn a total of  0.00  from holding Ford Motor or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Ford Motor  vs.  Hang Lung Properties

Ford Motor

Risk-Adjusted Performance

10 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Ford Motor are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating technical and fundamental indicators, Ford reported solid returns over the last few months and may actually be approaching a breakup point.

Hang Lung Properties

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Hang Lung Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Ford and Hang Lung

The main advantage of trading using opposite Ford and Hang Lung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ford position performs unexpectedly, Hang Lung 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 Lung will offset losses from the drop in Hang Lung's long position.

The idea behind Ford Motor and Hang Lung Properties 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.

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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.