Correlation Between Britvic PLC and Hang Lung

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

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

Diversification Opportunities for Britvic PLC and Hang Lung

0.19

Correlation Coefficient

Britvic PLC  Hang Lung

Average diversification

The 3 months correlation between Britvic and Hang is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Britvic PLC ADR 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 Britvic PLC 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 Britvic PLC ADR 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 Britvic PLC i.e., Britvic PLC and Hang Lung go up and down completely randomly.

Pair Corralation between Britvic PLC and Hang Lung

Assuming the 90 days horizon Britvic PLC ADR is expected to generate 0.62 times more return on investment than Hang Lung. However, Britvic PLC ADR is 1.62 times less risky than Hang Lung. It trades about 0.09 of its potential returns per unit of risk. Hang Lung Properties is currently generating about -0.05 per unit of risk. If you would invest  1,798  in Britvic PLC ADR on October 26, 2024 and sell it today you would earn a total of  1,341  from holding Britvic PLC ADR or generate 74.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	91.5%
Values	Daily Returns

Britvic PLC ADR  vs.  Hang Lung Properties

Britvic PLC ADR

Risk-Adjusted Performance

0 of 100

Very Weak

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

Hang Lung Properties

Risk-Adjusted Performance

0 of 100

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 latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Britvic PLC and Hang Lung

The main advantage of trading using opposite Britvic PLC and Hang Lung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Britvic PLC 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 Britvic PLC ADR 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.