Correlation Between Hang Lung and Hysan Development

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

Diversification Opportunities for Hang Lung and Hysan Development

0.88

Correlation Coefficient

Hang Lung  Hysan Development

Very poor diversification

The 3 months correlation between Hang and Hysan is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Properties and Hysan Development Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hysan Development 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 Hysan Development. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hysan Development has no effect on the direction of Hang Lung i.e., Hang Lung and Hysan Development go up and down completely randomly.

Pair Corralation between Hang Lung and Hysan Development

Assuming the 90 days horizon Hang Lung is expected to generate 1.92 times less return on investment than Hysan Development. But when comparing it to its historical volatility, Hang Lung Properties is 2.06 times less risky than Hysan Development. It trades about 0.06 of its potential returns per unit of risk. Hysan Development Co is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  286.00  in Hysan Development Co on December 28, 2024 and sell it today you would earn a total of  24.00  from holding Hysan Development Co or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Hang Lung Properties  vs.  Hysan Development Co

Hang Lung Properties

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hang Lung Properties are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Hang Lung is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Hysan Development

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hysan Development Co are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hysan Development may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Hang Lung and Hysan Development

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

The idea behind Hang Lung Properties and Hysan Development Co 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.