Correlation Between Sun Hung and UOL Group

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

Diversification Opportunities for Sun Hung and UOL Group

-0.49
  Correlation Coefficient

Very good diversification

The 3 months correlation between Sun and UOL is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Sun Hung Kai and UOL Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOL Group 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 UOL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOL Group has no effect on the direction of Sun Hung i.e., Sun Hung and UOL Group go up and down completely randomly.

Pair Corralation between Sun Hung and UOL Group

Assuming the 90 days horizon Sun Hung Kai is expected to under-perform the UOL Group. But the pink sheet apears to be less risky and, when comparing its historical volatility, Sun Hung Kai is 1.16 times less risky than UOL Group. The pink sheet trades about -0.32 of its potential returns per unit of risk. The UOL Group Ltd is currently generating about -0.09 of returns per unit of risk over similar time horizon. If you would invest  1,691  in UOL Group Ltd on January 17, 2024 and sell it today you would lose (43.00) from holding UOL Group Ltd or give up 2.54% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy100.0%
ValuesDaily Returns

Sun Hung Kai  vs.  UOL Group Ltd

 Performance 
       Timeline  
Sun Hung Kai 

Risk-Adjusted Performance

0 of 100

 
Weak
 
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.
UOL Group 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days UOL Group Ltd has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Sun Hung and UOL Group Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Sun Hung and UOL Group

The main advantage of trading using opposite Sun Hung and UOL Group positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sun Hung position performs unexpectedly, UOL Group 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 UOL Group will offset losses from the drop in UOL Group's long position.
The idea behind Sun Hung Kai and UOL Group Ltd 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.

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