Correlation Between Hung Sheng and Tachan Securities

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

Diversification Opportunities for Hung Sheng and Tachan Securities

0.13

Correlation Coefficient

Hung Sheng  Tachan Securities

Average diversification

The 3 months correlation between Hung and Tachan is 0.13. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Tachan Securities Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tachan Securities 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 Tachan Securities. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tachan Securities has no effect on the direction of Hung Sheng i.e., Hung Sheng and Tachan Securities go up and down completely randomly.

Pair Corralation between Hung Sheng and Tachan Securities

Assuming the 90 days trading horizon Hung Sheng Construction is expected to under-perform the Tachan Securities. In addition to that, Hung Sheng is 2.26 times more volatile than Tachan Securities Co. It trades about -0.33 of its total potential returns per unit of risk. Tachan Securities Co is currently generating about -0.12 per unit of volatility. If you would invest  1,900  in Tachan Securities Co on October 10, 2024 and sell it today you would lose (20.00) from holding Tachan Securities Co or give up 1.05% of portfolio value over 90 days.

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

Hung Sheng Construction  vs.  Tachan Securities Co

Hung Sheng Construction

Risk-Adjusted Performance

2 of 100

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.

Tachan Securities

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Tachan Securities Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tachan Securities 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 Tachan Securities

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

The idea behind Hung Sheng Construction and Tachan Securities Co 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.