Correlation Between Sun Hung and Far East

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Can any of the company-specific risk be diversified away by investing in both Sun Hung and Far East 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 Far East 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 Far East Consortium, you can compare the effects of market volatilities on Sun Hung and Far East 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 Far East. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sun Hung and Far East.

Diversification Opportunities for Sun Hung and Far East

0.0
  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Sun and Far is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Far East Consortium in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Far East Consortium 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 Far East. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Far East Consortium has no effect on the direction of Sun Hung i.e., Sun Hung and Far East go up and down completely randomly.

Pair Corralation between Sun Hung and Far East

Assuming the 90 days horizon Sun Hung Kai is expected to generate 0.9 times more return on investment than Far East. However, Sun Hung Kai is 1.11 times less risky than Far East. It trades about -0.04 of its potential returns per unit of risk. Far East Consortium is currently generating about -0.11 per unit of risk. If you would invest  978.00  in Sun Hung Kai on January 20, 2024 and sell it today you would lose (86.00) from holding Sun Hung Kai or give up 8.79% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy99.19%
ValuesDaily Returns

Sun Hung Kai  vs.  Far East Consortium

 Performance 
       Timeline  
Sun Hung Kai 

Risk-Adjusted Performance

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Strong
Very Weak
Over the last 90 days Sun Hung Kai has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking indicators, Sun Hung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.
Far East Consortium 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days Far East Consortium has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, Far East is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Hung and Far East Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Hung and Far East

The main advantage of trading using opposite Sun Hung and Far East positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Hung position performs unexpectedly, Far East 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 Far East will offset losses from the drop in Far East's long position.
The idea behind Sun Hung Kai and Far East Consortium 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.
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.

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