Correlation Between Hung Sheng and Kindom Construction

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

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

Diversification Opportunities for Hung Sheng and Kindom Construction

0.61

Correlation Coefficient

Hung Sheng  Kindom Construction

Poor diversification

The 3 months correlation between Hung and Kindom is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Kindom Construction Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kindom Construction Corp and Hung Sheng 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 Hung Sheng Construction are associated (or correlated) with Kindom Construction. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kindom Construction Corp has no effect on the direction of Hung Sheng i.e., Hung Sheng and Kindom Construction go up and down completely randomly.

Pair Corralation between Hung Sheng and Kindom Construction

Assuming the 90 days trading horizon Hung Sheng is expected to generate 3.56 times less return on investment than Kindom Construction. But when comparing it to its historical volatility, Hung Sheng Construction is 1.37 times less risky than Kindom Construction. It trades about 0.03 of its potential returns per unit of risk. Kindom Construction Corp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  2,693  in Kindom Construction Corp on September 15, 2024 and sell it today you would earn a total of  2,737  from holding Kindom Construction Corp or generate 101.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.79%
Values	Daily Returns

Hung Sheng Construction  vs.  Kindom Construction Corp

Hung Sheng Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Sheng Construction are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Hung Sheng is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Kindom Construction Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kindom Construction Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly abnormal basic indicators, Kindom Construction may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Hung Sheng and Kindom Construction

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

The idea behind Hung Sheng Construction and Kindom Construction Corp 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.