Correlation Between Heng Leasing and MFC Industrial

Can any of the company-specific risk be diversified away by investing in both Heng Leasing and MFC Industrial 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 MFC Industrial 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 MFC Industrial Investment, you can compare the effects of market volatilities on Heng Leasing and MFC Industrial 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 MFC Industrial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heng Leasing and MFC Industrial.

Diversification Opportunities for Heng Leasing and MFC Industrial

-0.6

Correlation Coefficient

Heng Leasing  MFC Industrial

Excellent diversification

The 3 months correlation between Heng and MFC is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Heng Leasing Capital and MFC Industrial Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MFC Industrial Investment 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 MFC Industrial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MFC Industrial Investment has no effect on the direction of Heng Leasing i.e., Heng Leasing and MFC Industrial go up and down completely randomly.

Pair Corralation between Heng Leasing and MFC Industrial

Assuming the 90 days trading horizon Heng Leasing Capital is expected to generate 0.17 times more return on investment than MFC Industrial. However, Heng Leasing Capital is 6.02 times less risky than MFC Industrial. It trades about -0.01 of its potential returns per unit of risk. MFC Industrial Investment is currently generating about -0.14 per unit of risk. If you would invest  107.00  in Heng Leasing Capital on December 29, 2024 and sell it today you would lose (3.00) from holding Heng Leasing Capital or give up 2.8% of portfolio value over 90 days.

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

Heng Leasing Capital  vs.  MFC Industrial Investment

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.

MFC Industrial Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days MFC Industrial Investment 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 forward-looking signals remain quite persistent which may send shares a bit higher in April 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 MFC Industrial

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

The idea behind Heng Leasing Capital and MFC Industrial Investment 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.