Correlation Between Hong Leong and Choo Bee

Can any of the company-specific risk be diversified away by investing in both Hong Leong and Choo Bee 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 Hong Leong and Choo Bee into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Leong Bank and Choo Bee Metal, you can compare the effects of market volatilities on Hong Leong and Choo Bee 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 Hong Leong with a short position of Choo Bee. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Leong and Choo Bee.

Diversification Opportunities for Hong Leong and Choo Bee

-0.49

Correlation Coefficient

Hong Leong  Choo Bee

Very good diversification

The 3 months correlation between Hong and Choo is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Hong Leong Bank and Choo Bee Metal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Choo Bee Metal and Hong Leong 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 Hong Leong Bank are associated (or correlated) with Choo Bee. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Choo Bee Metal has no effect on the direction of Hong Leong i.e., Hong Leong and Choo Bee go up and down completely randomly.

Pair Corralation between Hong Leong and Choo Bee

Assuming the 90 days trading horizon Hong Leong Bank is expected to generate 0.5 times more return on investment than Choo Bee. However, Hong Leong Bank is 1.99 times less risky than Choo Bee. It trades about 0.0 of its potential returns per unit of risk. Choo Bee Metal is currently generating about -0.15 per unit of risk. If you would invest  2,014  in Hong Leong Bank on December 30, 2024 and sell it today you would earn a total of  0.00  from holding Hong Leong Bank or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Hong Leong Bank  vs.  Choo Bee Metal

Hong Leong Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hong Leong Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Hong Leong is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Choo Bee Metal

Risk-Adjusted Performance

Very Weak

Over the last 90 days Choo Bee Metal has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Hong Leong and Choo Bee

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

The idea behind Hong Leong Bank and Choo Bee Metal 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.