Correlation Between Henderson Land and Hong Kong

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

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

Diversification Opportunities for Henderson Land and Hong Kong

-0.18

Correlation Coefficient

Henderson Land  Hong Kong

Good diversification

The 3 months correlation between Henderson and Hong is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Henderson Land Development and Hong Kong and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hong Kong and Henderson Land 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 Henderson Land Development are associated (or correlated) with Hong Kong. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hong Kong has no effect on the direction of Henderson Land i.e., Henderson Land and Hong Kong go up and down completely randomly.

Pair Corralation between Henderson Land and Hong Kong

Assuming the 90 days horizon Henderson Land Development is expected to under-perform the Hong Kong. But the pink sheet apears to be less risky and, when comparing its historical volatility, Henderson Land Development is 3.36 times less risky than Hong Kong. The pink sheet trades about -0.15 of its potential returns per unit of risk. The Hong Kong and is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  71.00  in Hong Kong and on October 25, 2024 and sell it today you would earn a total of  3.00  from holding Hong Kong and or generate 4.23% return on investment over 90 days.

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

Henderson Land Development  vs.  Hong Kong and

Henderson Land Devel

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Henderson Land Development has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain fairly strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Hong Kong

Risk-Adjusted Performance

3 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong and are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental indicators, Hong Kong showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Henderson Land and Hong Kong

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

The idea behind Henderson Land Development and Hong Kong and 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.