Correlation Between Asia Pptys and Hang Lung

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

By analyzing existing cross correlation between Asia Pptys and Hang Lung Properties, you can compare the effects of market volatilities on Asia Pptys and Hang Lung 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 Asia Pptys with a short position of Hang Lung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Asia Pptys and Hang Lung.

Diversification Opportunities for Asia Pptys and Hang Lung

0.05

Correlation Coefficient

Asia Pptys  Hang Lung

Significant diversification

The 3 months correlation between Asia and Hang is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Asia Pptys and Hang Lung Properties in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Lung Properties and Asia Pptys 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 Asia Pptys are associated (or correlated) with Hang Lung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Lung Properties has no effect on the direction of Asia Pptys i.e., Asia Pptys and Hang Lung go up and down completely randomly.

Pair Corralation between Asia Pptys and Hang Lung

Given the investment horizon of 90 days Asia Pptys is expected to generate 18.2 times more return on investment than Hang Lung. However, Asia Pptys is 18.2 times more volatile than Hang Lung Properties. It trades about 0.09 of its potential returns per unit of risk. Hang Lung Properties is currently generating about 0.0 per unit of risk. If you would invest  5.00  in Asia Pptys on December 1, 2024 and sell it today you would lose (3.79) from holding Asia Pptys or give up 75.8% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	96.77%
Values	Daily Returns

Asia Pptys  vs.  Hang Lung Properties

Asia Pptys

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Asia Pptys are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Asia Pptys showed solid returns over the last few months and may actually be approaching a breakup point.

Hang Lung Properties

Risk-Adjusted Performance

Very Weak

Over the last 90 days Hang Lung Properties has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Hang Lung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Asia Pptys and Hang Lung

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

The idea behind Asia Pptys and Hang Lung Properties 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.