Correlation Between Hung Sheng and Capital Futures

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

Diversification Opportunities for Hung Sheng and Capital Futures

-0.55

Correlation Coefficient

Hung Sheng  Capital Futures

Excellent diversification

The 3 months correlation between Hung and Capital is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding Hung Sheng Construction and Capital Futures Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Futures 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 Capital Futures. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Futures Corp has no effect on the direction of Hung Sheng i.e., Hung Sheng and Capital Futures go up and down completely randomly.

Pair Corralation between Hung Sheng and Capital Futures

Assuming the 90 days trading horizon Hung Sheng Construction is expected to generate 1.39 times more return on investment than Capital Futures. However, Hung Sheng is 1.39 times more volatile than Capital Futures Corp. It trades about 0.02 of its potential returns per unit of risk. Capital Futures Corp is currently generating about -0.23 per unit of risk. If you would invest  2,595  in Hung Sheng Construction on December 29, 2024 and sell it today you would earn a total of  30.00  from holding Hung Sheng Construction or generate 1.16% return on investment over 90 days.

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

Hung Sheng Construction  vs.  Capital Futures Corp

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 1 (%) 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.

Capital Futures Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capital Futures Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in April 2025. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Hung Sheng and Capital Futures

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

The idea behind Hung Sheng Construction and Capital Futures 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.

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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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.