Correlation Between Chien Kuo and Hung Sheng

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

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

Diversification Opportunities for Chien Kuo and Hung Sheng

-0.24

Correlation Coefficient

Chien Kuo  Hung Sheng

Very good diversification

The 3 months correlation between Chien and Hung is -0.24. Overlapping area represents the amount of risk that can be diversified away by holding Chien Kuo Construction and Hung Sheng Construction in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hung Sheng Construction and Chien Kuo 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 Chien Kuo Construction are associated (or correlated) with Hung Sheng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hung Sheng Construction has no effect on the direction of Chien Kuo i.e., Chien Kuo and Hung Sheng go up and down completely randomly.

Pair Corralation between Chien Kuo and Hung Sheng

Assuming the 90 days trading horizon Chien Kuo Construction is expected to generate 0.85 times more return on investment than Hung Sheng. However, Chien Kuo Construction is 1.18 times less risky than Hung Sheng. It trades about 0.02 of its potential returns per unit of risk. Hung Sheng Construction is currently generating about -0.07 per unit of risk. If you would invest  2,725  in Chien Kuo Construction on December 5, 2024 and sell it today you would earn a total of  35.00  from holding Chien Kuo Construction or generate 1.28% return on investment over 90 days.

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

Chien Kuo Construction  vs.  Hung Sheng Construction

Chien Kuo Construction

Risk-Adjusted Performance

Weak

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

Hung Sheng Construction

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hung Sheng Construction has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Pair Trading with Chien Kuo and Hung Sheng

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

The idea behind Chien Kuo Construction and Hung Sheng Construction 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.