Correlation Between Hung Sheng and SS Healthcare

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

Diversification Opportunities for Hung Sheng and SS Healthcare

0.02

Correlation Coefficient

Hung Sheng  SS Healthcare

Significant diversification

The 3 months correlation between Hung and 4198 is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and SS Healthcare Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SS Healthcare Holding 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 SS Healthcare. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SS Healthcare Holding has no effect on the direction of Hung Sheng i.e., Hung Sheng and SS Healthcare go up and down completely randomly.

Pair Corralation between Hung Sheng and SS Healthcare

Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 0.65 times more return on investment than SS Healthcare. However, Hung Sheng Construction is 1.53 times less risky than SS Healthcare. It trades about 0.03 of its potential returns per unit of risk. SS Healthcare Holding is currently generating about 0.02 per unit of risk. If you would invest  2,590  in Hung Sheng Construction on December 21, 2024 and sell it today you would earn a total of  55.00  from holding Hung Sheng Construction or generate 2.12% return on investment over 90 days.

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

Hung Sheng Construction  vs.  SS Healthcare Holding

Hung Sheng Construction

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Sheng Construction are ranked lower than 2 (%) 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.

SS Healthcare Holding

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in SS Healthcare Holding are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, SS Healthcare is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Hung Sheng and SS Healthcare

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

The idea behind Hung Sheng Construction and SS Healthcare Holding 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.