Correlation Between Heng Leasing and East Coast

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

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

Diversification Opportunities for Heng Leasing and East Coast

0.43

Correlation Coefficient

Heng Leasing  East Coast

Very weak diversification

The 3 months correlation between Heng and East is 0.43. Overlapping area represents the amount of risk that can be diversified away by holding Heng Leasing Capital and East Coast Furnitech in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Coast Furnitech and Heng Leasing 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 Heng Leasing Capital are associated (or correlated) with East Coast. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Coast Furnitech has no effect on the direction of Heng Leasing i.e., Heng Leasing and East Coast go up and down completely randomly.

Pair Corralation between Heng Leasing and East Coast

Assuming the 90 days trading horizon Heng Leasing Capital is expected to under-perform the East Coast. But the stock apears to be less risky and, when comparing its historical volatility, Heng Leasing Capital is 17.27 times less risky than East Coast. The stock trades about -0.06 of its potential returns per unit of risk. The East Coast Furnitech is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  156.00  in East Coast Furnitech on November 29, 2024 and sell it today you would lose (136.00) from holding East Coast Furnitech or give up 87.18% of portfolio value over 90 days.

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

Heng Leasing Capital  vs.  East Coast Furnitech

Heng Leasing Capital

Risk-Adjusted Performance

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.

East Coast Furnitech

Risk-Adjusted Performance

Very Weak

Over the last 90 days East Coast Furnitech has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's technical and fundamental indicators remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with Heng Leasing and East Coast

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

The idea behind Heng Leasing Capital and East Coast Furnitech 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.