Correlation Between Britania PCL and Heng Leasing

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

By analyzing existing cross correlation between Britania PCL and Heng Leasing Capital, you can compare the effects of market volatilities on Britania PCL and Heng Leasing 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 Britania PCL with a short position of Heng Leasing. Check out your portfolio center. Please also check ongoing floating volatility patterns of Britania PCL and Heng Leasing.

Diversification Opportunities for Britania PCL and Heng Leasing

0.94

Correlation Coefficient

Britania PCL  Heng Leasing

Almost no diversification

The 3 months correlation between Britania and Heng is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Britania PCL and Heng Leasing Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heng Leasing Capital and Britania PCL 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 Britania PCL are associated (or correlated) with Heng Leasing. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heng Leasing Capital has no effect on the direction of Britania PCL i.e., Britania PCL and Heng Leasing go up and down completely randomly.

Pair Corralation between Britania PCL and Heng Leasing

Assuming the 90 days trading horizon Britania PCL is expected to generate 0.57 times more return on investment than Heng Leasing. However, Britania PCL is 1.74 times less risky than Heng Leasing. It trades about -0.04 of its potential returns per unit of risk. Heng Leasing Capital is currently generating about -0.02 per unit of risk. If you would invest  443.00  in Britania PCL on September 3, 2024 and sell it today you would lose (29.00) from holding Britania PCL or give up 6.55% of portfolio value over 90 days.

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

Britania PCL  vs.  Heng Leasing Capital

Britania PCL

Risk-Adjusted Performance

0 of 100

Very Weak

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

Heng Leasing Capital

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Britania PCL and Heng Leasing

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

The idea behind Britania PCL and Heng Leasing Capital 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.