Correlation Between Trk Corp and Hung Ching

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

By analyzing existing cross correlation between Trk Corp and Hung Ching Development, you can compare the effects of market volatilities on Trk Corp and Hung Ching 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 Trk Corp with a short position of Hung Ching. Check out your portfolio center. Please also check ongoing floating volatility patterns of Trk Corp and Hung Ching.

Diversification Opportunities for Trk Corp and Hung Ching

0.56

Correlation Coefficient

Trk Corp  Hung Ching

Very weak diversification

The 3 months correlation between Trk and Hung is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Trk Corp and Hung Ching Development in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Ching Development and Trk Corp 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 Trk Corp are associated (or correlated) with Hung Ching. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Ching Development has no effect on the direction of Trk Corp i.e., Trk Corp and Hung Ching go up and down completely randomly.

Pair Corralation between Trk Corp and Hung Ching

Assuming the 90 days trading horizon Trk Corp is expected to generate 1.26 times less return on investment than Hung Ching. But when comparing it to its historical volatility, Trk Corp is 1.01 times less risky than Hung Ching. It trades about 0.05 of its potential returns per unit of risk. Hung Ching Development is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,090  in Hung Ching Development on October 11, 2024 and sell it today you would earn a total of  1,750  from holding Hung Ching Development or generate 83.73% return on investment over 90 days.

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

Trk Corp  vs.  Hung Ching Development

Trk Corp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Trk Corp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Trk Corp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Hung Ching Development

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Ching Development are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Hung Ching showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Trk Corp and Hung Ching

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

The idea behind Trk Corp and Hung Ching Development 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.