Correlation Between Hang Lung and UOL Group

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

Diversification Opportunities for Hang Lung and UOL Group

0.74

Correlation Coefficient

Hang Lung  UOL Group

Poor diversification

The 3 months correlation between Hang and UOL is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Hang Lung Properties and UOL Group Ltd in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on UOL Group 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 UOL Group. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of UOL Group has no effect on the direction of Hang Lung i.e., Hang Lung and UOL Group go up and down completely randomly.

Pair Corralation between Hang Lung and UOL Group

Assuming the 90 days horizon Hang Lung is expected to generate 1.94 times less return on investment than UOL Group. But when comparing it to its historical volatility, Hang Lung Properties is 1.56 times less risky than UOL Group. It trades about 0.09 of its potential returns per unit of risk. UOL Group Ltd is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,536  in UOL Group Ltd on December 17, 2024 and sell it today you would earn a total of  257.00  from holding UOL Group Ltd or generate 16.73% return on investment over 90 days.

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

Hang Lung Properties  vs.  UOL Group Ltd

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 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Hang Lung may actually be approaching a critical reversion point that can send shares even higher in April 2025.

UOL Group

Risk-Adjusted Performance

OK

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

Pair Trading with Hang Lung and UOL Group

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

The idea behind Hang Lung Properties and UOL Group Ltd 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.