Correlation Between Datang International and Sun Hung

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

By analyzing existing cross correlation between Datang International Power and Sun Hung Kai, you can compare the effects of market volatilities on Datang International and Sun Hung 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 Datang International with a short position of Sun Hung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Datang International and Sun Hung.

Diversification Opportunities for Datang International and Sun Hung

0.2

Correlation Coefficient

Datang International  Sun Hung

Modest diversification

The 3 months correlation between Datang and Sun is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Datang International Power and Sun Hung Kai in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sun Hung Kai and Datang International 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 Datang International Power are associated (or correlated) with Sun Hung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sun Hung Kai has no effect on the direction of Datang International i.e., Datang International and Sun Hung go up and down completely randomly.

Pair Corralation between Datang International and Sun Hung

Assuming the 90 days horizon Datang International Power is expected to under-perform the Sun Hung. But the stock apears to be less risky and, when comparing its historical volatility, Datang International Power is 1.16 times less risky than Sun Hung. The stock trades about -0.01 of its potential returns per unit of risk. The Sun Hung Kai is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  610.00  in Sun Hung Kai on September 2, 2024 and sell it today you would earn a total of  320.00  from holding Sun Hung Kai or generate 52.46% return on investment over 90 days.

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

Datang International Power  vs.  Sun Hung Kai

Datang International

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Datang International Power has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Datang International is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sun Hung Kai

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Sun Hung reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Datang International and Sun Hung

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

The idea behind Datang International Power and Sun Hung Kai 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.