Correlation Between Hong Kong and Fair Oaks

Can any of the company-specific risk be diversified away by investing in both Hong Kong and Fair Oaks 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 Hong Kong and Fair Oaks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hong Kong Land and Fair Oaks Income, you can compare the effects of market volatilities on Hong Kong and Fair Oaks 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 Hong Kong with a short position of Fair Oaks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and Fair Oaks.

Diversification Opportunities for Hong Kong and Fair Oaks

0.0

Correlation Coefficient

Hong Kong  Fair Oaks

Pay attention - limited upside

The 3 months correlation between Hong and Fair is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and Fair Oaks Income in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fair Oaks Income and Hong Kong 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 Hong Kong Land are associated (or correlated) with Fair Oaks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fair Oaks Income has no effect on the direction of Hong Kong i.e., Hong Kong and Fair Oaks go up and down completely randomly.

Pair Corralation between Hong Kong and Fair Oaks

Assuming the 90 days trading horizon Hong Kong is expected to generate 1.61 times less return on investment than Fair Oaks. But when comparing it to its historical volatility, Hong Kong Land is 2.73 times less risky than Fair Oaks. It trades about 0.13 of its potential returns per unit of risk. Fair Oaks Income is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  55.00  in Fair Oaks Income on December 22, 2024 and sell it today you would earn a total of  2.00  from holding Fair Oaks Income or generate 3.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hong Kong Land  vs.  Fair Oaks Income

Hong Kong Land

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Hong Kong is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Fair Oaks Income

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fair Oaks Income are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Fair Oaks is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Hong Kong and Fair Oaks

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

The idea behind Hong Kong Land and Fair Oaks Income 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.