Correlation Between Hang Lung and Alfa Laval

Can any of the company-specific risk be diversified away by investing in both Hang Lung and Alfa Laval 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 Hang Lung and Alfa Laval into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hang Lung Properties and Alfa Laval AB, you can compare the effects of market volatilities on Hang Lung and Alfa Laval 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 Hang Lung with a short position of Alfa Laval. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hang Lung and Alfa Laval.

Diversification Opportunities for Hang Lung and Alfa Laval

0.59

Correlation Coefficient

Hang Lung  Alfa Laval

Very weak diversification

The 3 months correlation between Hang and Alfa is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Properties and Alfa Laval AB in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alfa Laval AB and Hang Lung 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 Hang Lung Properties are associated (or correlated) with Alfa Laval. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alfa Laval AB has no effect on the direction of Hang Lung i.e., Hang Lung and Alfa Laval go up and down completely randomly.

Pair Corralation between Hang Lung and Alfa Laval

Assuming the 90 days horizon Hang Lung Properties is expected to generate 1.13 times more return on investment than Alfa Laval. However, Hang Lung is 1.13 times more volatile than Alfa Laval AB. It trades about 0.12 of its potential returns per unit of risk. Alfa Laval AB is currently generating about 0.09 per unit of risk. If you would invest  393.00  in Hang Lung Properties on December 18, 2024 and sell it today you would earn a total of  46.00  from holding Hang Lung Properties or generate 11.7% return on investment over 90 days.

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

Hang Lung Properties  vs.  Alfa Laval AB

Hang Lung Properties

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Lung Properties are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hang Lung showed solid returns over the last few months and may actually be approaching a breakup point.

Alfa Laval AB

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Alfa Laval AB are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Alfa Laval may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hang Lung and Alfa Laval

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

The idea behind Hang Lung Properties and Alfa Laval AB 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.

Check out your portfolio center.

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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.