Correlation Between Kung Sing and Hung Sheng

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

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

Diversification Opportunities for Kung Sing and Hung Sheng

0.31

Correlation Coefficient

Kung Sing  Hung Sheng

Weak diversification

The 3 months correlation between Kung and Hung is 0.31. Overlapping area represents the amount of risk that can be diversified away by holding Kung Sing Engineering 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 Kung Sing 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 Kung Sing Engineering 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 Kung Sing i.e., Kung Sing and Hung Sheng go up and down completely randomly.

Pair Corralation between Kung Sing and Hung Sheng

Assuming the 90 days trading horizon Kung Sing Engineering is expected to generate 2.65 times more return on investment than Hung Sheng. However, Kung Sing is 2.65 times more volatile than Hung Sheng Construction. It trades about 0.26 of its potential returns per unit of risk. Hung Sheng Construction is currently generating about 0.29 per unit of risk. If you would invest  1,040  in Kung Sing Engineering on December 5, 2024 and sell it today you would earn a total of  125.00  from holding Kung Sing Engineering or generate 12.02% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Kung Sing Engineering  vs.  Hung Sheng Construction

Kung Sing Engineering

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Kung Sing Engineering are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Kung Sing 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 Kung Sing and Hung Sheng

The main advantage of trading using opposite Kung Sing and Hung Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Kung Sing 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 Kung Sing Engineering 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.

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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.