Correlation Between Hong Kong and China Resources

Can any of the company-specific risk be diversified away by investing in both Hong Kong and China Resources 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 China Resources 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 China Resources Land, you can compare the effects of market volatilities on Hong Kong and China Resources 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 China Resources. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hong Kong and China Resources.

Diversification Opportunities for Hong Kong and China Resources

-0.02

Correlation Coefficient

Hong Kong  China Resources

Good diversification

The 3 months correlation between Hong and China is -0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hong Kong Land and China Resources Land in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on China Resources Land 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 China Resources. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of China Resources Land has no effect on the direction of Hong Kong i.e., Hong Kong and China Resources go up and down completely randomly.

Pair Corralation between Hong Kong and China Resources

If you would invest  2,118  in Hong Kong Land on December 27, 2024 and sell it today you would earn a total of  132.00  from holding Hong Kong Land or generate 6.23% return on investment over 90 days.

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

Hong Kong Land  vs.  China Resources Land

Hong Kong Land

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Hong Kong Land are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak forward-looking signals, Hong Kong may actually be approaching a critical reversion point that can send shares even higher in April 2025.

China Resources Land

Risk-Adjusted Performance

Very Weak

Over the last 90 days China Resources Land has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable forward-looking indicators, China Resources is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Hong Kong and China Resources

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

The idea behind Hong Kong Land and China Resources Land 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.