Correlation Between Heng Leasing and TRV Rubber

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

Diversification Opportunities for Heng Leasing and TRV Rubber

-0.3

Correlation Coefficient

Heng Leasing  TRV Rubber

Very good diversification

The 3 months correlation between Heng and TRV is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Heng Leasing Capital and TRV Rubber Products in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TRV Rubber Products 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 TRV Rubber. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TRV Rubber Products has no effect on the direction of Heng Leasing i.e., Heng Leasing and TRV Rubber go up and down completely randomly.

Pair Corralation between Heng Leasing and TRV Rubber

Assuming the 90 days trading horizon Heng Leasing Capital is expected to generate 0.85 times more return on investment than TRV Rubber. However, Heng Leasing Capital is 1.18 times less risky than TRV Rubber. It trades about 0.06 of its potential returns per unit of risk. TRV Rubber Products is currently generating about -0.27 per unit of risk. If you would invest  102.00  in Heng Leasing Capital on December 20, 2024 and sell it today you would earn a total of  7.00  from holding Heng Leasing Capital or generate 6.86% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	82.26%
Values	Daily Returns

Heng Leasing Capital  vs.  TRV Rubber Products

Heng Leasing Capital

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Heng Leasing Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting forward-looking signals, Heng Leasing may actually be approaching a critical reversion point that can send shares even higher in April 2025.

TRV Rubber Products

Risk-Adjusted Performance

Very Weak

Over the last 90 days TRV Rubber Products 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 basic indicators 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 TRV Rubber

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

The idea behind Heng Leasing Capital and TRV Rubber Products 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.