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 Land, 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
Weak diversification
The 3 months correlation between Sun and Hong is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and Hong Kong Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong Land 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 Land 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 is expected to generate 5.53 times less return on investment than Hong Kong. But when comparing it to its historical volatility, Sun Hung Kai is 1.78 times less risky than Hong Kong. It trades about 0.05 of its potential returns per unit of risk. Hong Kong Land is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,533 in Hong Kong Land on February 5, 2024 and sell it today you would earn a total of 97.00 from holding Hong Kong Land or generate 6.33% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Sun Hung Kai vs. Hong Kong Land
Performance |
Timeline |
Sun Hung Kai |
Hong Kong Land |
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. Holiday Island Holdings | Sun Hung vs. CRA International | Sun Hung vs. UFP Technologies | Sun Hung vs. Progressive Corp |
Hong Kong vs. Holiday Island Holdings | Hong Kong vs. CRA International | Hong Kong vs. UFP Technologies | Hong Kong vs. Progressive Corp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
Other Complementary Tools
Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
Price Ceiling Movement Calculate and plot Price Ceiling Movement for different equity instruments | |
ETF Categories List of ETF categories grouped based on various criteria, such as the investment strategy or type of investments | |
Global Correlations Find global opportunities by holding instruments from different markets | |
Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets |