Correlation Between CCSB Financial and Hang Seng

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

By analyzing existing cross correlation between CCSB Financial Corp and Hang Seng Bank, you can compare the effects of market volatilities on CCSB Financial and Hang Seng 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 CCSB Financial with a short position of Hang Seng. Check out your portfolio center. Please also check ongoing floating volatility patterns of CCSB Financial and Hang Seng.

Diversification Opportunities for CCSB Financial and Hang Seng

0.35

Correlation Coefficient

CCSB Financial  Hang Seng

Weak diversification

The 3 months correlation between CCSB and Hang is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding CCSB Financial Corp and Hang Seng Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hang Seng Bank and CCSB Financial 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 CCSB Financial Corp are associated (or correlated) with Hang Seng. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hang Seng Bank has no effect on the direction of CCSB Financial i.e., CCSB Financial and Hang Seng go up and down completely randomly.

Pair Corralation between CCSB Financial and Hang Seng

Given the investment horizon of 90 days CCSB Financial Corp is expected to under-perform the Hang Seng. In addition to that, CCSB Financial is 1.27 times more volatile than Hang Seng Bank. It trades about -0.18 of its total potential returns per unit of risk. Hang Seng Bank is currently generating about -0.05 per unit of volatility. If you would invest  1,206  in Hang Seng Bank on September 21, 2024 and sell it today you would lose (33.00) from holding Hang Seng Bank or give up 2.74% of portfolio value over 90 days.

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

CCSB Financial Corp  vs.  Hang Seng Bank

CCSB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCSB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Hang Seng Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with CCSB Financial and Hang Seng

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

The idea behind CCSB Financial Corp and Hang Seng Bank 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.