Correlation Between First Bankers and Hang Seng

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

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

Diversification Opportunities for First Bankers and Hang Seng

-0.2

Correlation Coefficient

First Bankers  Hang Seng

Good diversification

The 3 months correlation between First and Hang is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Bankers Trustshares 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 First Bankers 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 First Bankers Trustshares 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 First Bankers i.e., First Bankers and Hang Seng go up and down completely randomly.

Pair Corralation between First Bankers and Hang Seng

Given the investment horizon of 90 days First Bankers Trustshares is expected to generate 0.62 times more return on investment than Hang Seng. However, First Bankers Trustshares is 1.6 times less risky than Hang Seng. It trades about -0.01 of its potential returns per unit of risk. Hang Seng Bank is currently generating about -0.01 per unit of risk. If you would invest  1,685  in First Bankers Trustshares on October 6, 2024 and sell it today you would lose (4.00) from holding First Bankers Trustshares or give up 0.24% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	85.0%
Values	Daily Returns

First Bankers Trustshares  vs.  Hang Seng Bank

First Bankers Trustshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Bankers Trustshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

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 latest conflicting performance, the Stock's technical and fundamental 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 First Bankers and Hang Seng

The main advantage of trading using opposite First Bankers and Hang Seng positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bankers 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 First Bankers Trustshares 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.