Correlation Between Heng Leasing and SPCG Public

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

Diversification Opportunities for Heng Leasing and SPCG Public

0.44

Correlation Coefficient

Heng Leasing  SPCG Public

Very weak diversification

The 3 months correlation between Heng and SPCG is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Heng Leasing Capital and SPCG Public in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SPCG Public 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 SPCG Public. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SPCG Public has no effect on the direction of Heng Leasing i.e., Heng Leasing and SPCG Public go up and down completely randomly.

Pair Corralation between Heng Leasing and SPCG Public

Assuming the 90 days trading horizon Heng Leasing Capital is expected to generate 1.77 times more return on investment than SPCG Public. However, Heng Leasing is 1.77 times more volatile than SPCG Public. It trades about -0.01 of its potential returns per unit of risk. SPCG Public is currently generating about -0.02 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 Together
Strength	Weak
Accuracy	98.41%
Values	Daily Returns

Heng Leasing Capital  vs.  SPCG Public

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.

SPCG Public

Risk-Adjusted Performance

Very Weak

Over the last 90 days SPCG Public has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent forward-looking signals, SPCG Public is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Heng Leasing and SPCG Public

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

The idea behind Heng Leasing Capital and SPCG Public 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.