Correlation Between GrandTech and Hung Sheng

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

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

Diversification Opportunities for GrandTech and Hung Sheng

-0.63

Correlation Coefficient

GrandTech  Hung Sheng

Excellent diversification

The 3 months correlation between GrandTech and Hung is -0.63. Overlapping area represents the amount of risk that can be diversified away by holding GrandTech CG Systems 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 GrandTech 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 GrandTech CG Systems 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 GrandTech i.e., GrandTech and Hung Sheng go up and down completely randomly.

Pair Corralation between GrandTech and Hung Sheng

Assuming the 90 days trading horizon GrandTech CG Systems is expected to under-perform the Hung Sheng. But the stock apears to be less risky and, when comparing its historical volatility, GrandTech CG Systems is 1.99 times less risky than Hung Sheng. The stock trades about -0.13 of its potential returns per unit of risk. The Hung Sheng Construction is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  2,545  in Hung Sheng Construction on September 17, 2024 and sell it today you would earn a total of  135.00  from holding Hung Sheng Construction or generate 5.3% return on investment over 90 days.

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

GrandTech CG Systems  vs.  Hung Sheng Construction

GrandTech CG Systems

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days GrandTech CG Systems 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.

Hung Sheng Construction

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hung Sheng Construction are ranked lower than 4 (%) 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.

Pair Trading with GrandTech and Hung Sheng

The main advantage of trading using opposite GrandTech and Hung Sheng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if GrandTech 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 GrandTech CG Systems 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.