Correlation Between Country Garden and Sun Hung

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

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

Diversification Opportunities for Country Garden and Sun Hung

-0.44

Correlation Coefficient

Country Garden  Sun Hung

Very good diversification

The 3 months correlation between Country and Sun is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Country Garden Holdings 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 Country Garden 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 Country Garden Holdings 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 Country Garden i.e., Country Garden and Sun Hung go up and down completely randomly.

Pair Corralation between Country Garden and Sun Hung

Assuming the 90 days horizon Country Garden Holdings is expected to generate 26.76 times more return on investment than Sun Hung. However, Country Garden is 26.76 times more volatile than Sun Hung Kai. It trades about 0.12 of its potential returns per unit of risk. Sun Hung Kai is currently generating about 0.09 per unit of risk. If you would invest  20.00  in Country Garden Holdings on September 3, 2024 and sell it today you would lose (2.00) from holding Country Garden Holdings or give up 10.0% of portfolio value over 90 days.

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

Country Garden Holdings  vs.  Sun Hung Kai

Country Garden Holdings

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Country Garden Holdings are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Country Garden reported solid returns over the last few months and may actually be approaching a breakup point.

Sun Hung Kai

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sun Hung Kai are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking indicators, Sun Hung may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Country Garden and Sun Hung

The main advantage of trading using opposite Country Garden and Sun Hung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Country Garden 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 Country Garden Holdings 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 File Import module to quickly import all of your third-party portfolios from your local drive in csv format.